Articles Posted in Business Law

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In 2010, BRC and Continental entered into a five‐year agreement. Continental was to sell to BRC approximately 1.8 million pounds of prime carbon black, annually, in approximately equal monthly quantities, with baseline prices for three grades, including N762, “to remain firm throughout the term.” Continental could meet any better offers that BRC received. Shipments continued regularly until March 2011, when demand began to exceed Continental’s production ability. Continental notified its buyers that N762 would be unavailable in May. BRC nonetheless placed an order. The parties dispute the nature of subsequent communications. Continental neither confirmed BRC’s order nor shipped N762. BRC demanded immediate shipment. Continental responded that it did “not have N762 available.” BRC purchased some N762 from another supplier at a higher price. Days later, Continental offered to ship N762 at price increases, which BRC refused to pay. After discussions, Continental sent an email stating that Continental would continue "shipping timely at the contract prices, and would not cut off supply” and would “ship one car next week.” Continental emphasized that the Agreement required it to supply about 150,000 pounds per month and that it already had shipped approximately 300,000 pounds per month. Continental shipped one railcar. Within a week, Continental emailed BRC seeking to increase the baseline prices and to accelerate payment terms. BRC sued, seeking its costs in purchasing from another supplier following Continental’s alleged repudiation. The Seventh Circuit rejected the characterization of the agreement as a requirements contract. On remand, BRC, without amending its complaint, pursued the alternative theory that the agreement is for a fixed-amount supply. The Seventh Circuit reversed summary judgment and remanded, finding the agreement, supported by mutuality and consideration, enforceable. The agreement imposed sufficiently definite obligations on both parties and was not an unenforceable "buyer's option." BRC can proceed in characterizing the contract as for a fixed amount. BRC altered only its legal characterization; its factual theory remained constant and Continental is not prejudiced by the change. View "BRC Rubber & Plastics, Inc. v. Continental Carbon Co." on Justia Law

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Carter, through broker Perkins, opened a commodities trading account to secure the prices his Wyoming ranch would receive for its cattle using financial instruments (hedging). After Perkins changed offices, those accounts were part of a “bulk transfer” to Straits. Carter did not sign new agreements. At Perkins’s request, Carter opened another Straits account to speculate in other categories. After Carter and Perkins split a $300,000 profit, Carter instructed Perkins to close the account. Perkins did not do so but continued speculating on Treasury Bond futures, losing $2 million over three months. Straits liquidated Carter’s livestock commodities holdings to satisfy most of the shortfall and sued for the deficiency. Carter established his right to the seized funds and an award of attorney fees but the court significantly reduced damages, finding that Carter failed to mitigate by not closely reading account statements and trading confirmations. The Seventh Circuit affirmed the interpretation of the contract but remanded for recalculation of damages. Finding Carte responsible for losses resulting from Perkins's fraud would apply a guarantee or ratification that was never given. Fraud victims are not responsible for their agent’s fraud before they learn of unauthorized activity. Under Illinois law, the injured party must have actual knowledge before it must act to mitigate its damages. The court affirmed the attorney fee award under the Illinois Consumer Fraud and Deceptive Business Practices Act. View "Straits Financial LLC v. Ten Sleep Cattle Co." on Justia Law

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Lester and William Lee created LIA in 1974 as a public company. William’s sons (Lester's nephews) later joined the business. LIA subsequently bought out the public shareholders, leaving Lester owning 516 shares; William owned 484. William created the Trust to hold his shares. The nephews served as trustees. Lester encountered difficulties with another company he owned, Maxim. He proposed that Maxim merge with LIA; William rejected this idea. Lester told the nephews, “I will screw you at every opportunity,” and made other threats, then, as majority shareholder, approved a merger of LIA and another company. The Trust asserted its rights under Indiana’s Dissenters’ Rights Statute. Lester gutted LIA to prevent the Trust from collecting the value of its LIA shares. He bought property from LIA on terms favorable to him and realized substantial profits. LIA subsidiaries were transferred for little or no consideration to Lester’s immediate family. Lester also perpetrated a collusive lawsuit, resulting in an agreed judgment that all LIA assets should be transferred to him and his companies. Lester did not disclose these actions to the nephews. In 2008, the Jennings Circuit Court conducted an appraisal in the dissenters’ rights action. Between the trial and the judgment, Lester dissolved LIA. The court entered a $7,522,879.73 judgment for the Trust. In 2012, Lester petitioned for Chapter 7 bankruptcy. The Trust initiated a successful adversary proceeding to pierce LIA’s corporate veil and hold Lester personally liable for the judgment. The Seventh Circuit affirmed, noting the facts were undisputed. View "William R. Lee Irrevocable Trust v. Lee" on Justia Law

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Gianino Plastering operated in St. Louis for over 30 years but abruptly closed in 2012. Gianino’s son, Curt, who had worked at Gianino Plastering for over a decade, founded his own company, CWG, taking on some of Gianino’s customers and employees. CWG completed jobs that Gianino had begun. Curt went into business on the same day that a $196,940.73 judgment was entered against Gianino, arising out of Gianino’s 2009 collective bargaining agreement, which obligated the company to make regular contributions to the Welfare and Pension Funds. The Funds were blocked from collecting on their judgment because Gianino filed for bankruptcy. The Funds then sued CWG, asserting that CWG is Gianino’s successor and alter ego, liable for the judgment and for other ongoing violations of the collective bargaining agreement. After discovery, the district court ruled that the Funds had not produced enough evidence to proceed to trial. The Seventh Circuit reversed. The Funds proffered considerable evidence that a trier of fact could use to support its case against CWG. A reasonable factfinder could find both common ownership and control between the two entities; CWG’s capitalization, common equipment, and shared clients remain disputed matters for trial. The Funds have strong evidence of intent and undisputed evidence of knowledge. View "McCleskey v. CWG Plastering, LLC" on Justia Law

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Kohl’s operates more than 1000 stores, 65 percent of which are leased. In 2011, Kohl’s announced that it was correcting several years of its financial filings because of multiple lease accounting errors. Plaintiffs, led by the Pension Fund, filed suit under the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), SEC Rule 10b-5, and the “controlling person” provisions of 15 U.S.C. 78t(a), alleging that Kohl’s and two executives defrauded investors by publishing false and misleading information prior to the corrections. The Fund argued that one can infer that the defendants knew that these statements were false or recklessly disregarded that possibility because Kohl’s recently had made similar lease accounting errors. Despite those earlier errors, it was pursuing aggressive investments in leased properties, and at the same time, company insiders sold considerable amounts of stock. The district court dismissed the complaint with prejudice for failure to meet the enhanced pleading requirements for scienter imposed by the Private Securities Litigation Reform Act. The Seventh Circuit affirmed, reasoning that the complaint fell short and the Fund did not suggest how an amendment might help. The Fund made a strong case that many of Kohl’s disclosures regarding its lease accounting practices were false but that is not enough. The Fund provided very few facts that would point either toward or away from scienter. View "Pension Trust Fund for Operating Engineers v. Kohl's Corp." on Justia Law

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Knopick purchased a Jayco recreational vehicle from an independent Iowa dealer for $414,583, taking title through an LLC he alone controlled. Jayco’s two-year limited manufacturer’s warranty disclaims all implied warranties and “does not cover … any RV used for rental or other commercial purposes,” explains that an RV is “used for commercial and/or business purposes if the RV owner or user files a tax form claiming any business or commercial tax benefit related to the RV, or if the RV is purchased, registered or titled in a business name,” and states that performance of repairs excluded from coverage are "goodwill" repairs and do not alter the warranty. Almost immediately, Knopick claims, the RV leaked, smelled of sewage, had paint issues, and contained poorly installed features, including bedspreads screwed into furniture and staples protruding from the carpet. Knopick drove it to Jayco’s Indiana factory for repairs. He later picked up the RV to drive to his Texas home. Concerned about continuing problems, Knopick left it at a Missouri repair facility, from which a Jayco driver took it to Indiana for further repairs. Jayco later had a driver deliver the coach to Knopick in Arkansas. Knopick remained unsatisfied and sued for breach of warranty under state law and the Magnuson-Moss Warranty Act, 15 U.S.C. 2301. The Seventh Circuit affirmed summary judgment for Jayco, finding that Knopick had no rights under the warranty because the RV was purchased by a business entity. View "Knopick v. Jayco, Inc." on Justia Law

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When Goplin began working at WeConnect, he signed the “AEI Alternative Entertainment Inc. Open Door Policy and Arbitration Program,” which referred to AEI throughout; it never mentioned WeConnect. Goplin brought a collective action under the Fair Labor Standards Act. WeConnect moved to compel arbitration, Fed.R.Civ.P. 12(b)(3), attaching an affidavit from its Director of Human Resources stating, “I am employed by WeConnect, Inc.—formerly known as Alternative Entertainment, Inc. or AEI.” Goplin claimed that WeConnect was not a party to the agreement and could not enforce it. He cited language on WeConnect’s website: WeConnect formed when two privately held companies, Alternative Entertainment, Inc. (AEI) and WeConnect Enterprise Solutions, combined in September 2016… we officially became one company. WeConnect asserted that WeConnect and AEI were two names for the same legal entity, stating: This was a name change, not a merger. The court held that WeConnect did not establish that it was a party to the agreement or otherwise entitled to enforce it. The court rejected subsequently-submitted corporate-form documents and affidavits, stating that new evidence cannot be introduced in a motion for reconsideration unless the movant shows “not only that [the] evidence was newly discovered or unknown to it until after the hearing, but also that it could not with reasonable diligence have discovered and produced such evidence.” The Seventh Circuit affirmed. View "Goplin v. WeConnect, Inc." on Justia Law

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In 2003, Pain Center contracted with SSIMED for medical-billing software and related services. In 2006, the parties entered into another contract, for records-management software and related services. In 2013, Pain Center sued SSIMED for breach of contract, breach of warranty, breach of the implied duty of good faith, and four tort claims, all arising out of alleged shortcomings in SSIMED’s software and services. The district judge found the entire suit untimely. The Seventh Circuit affirmed on all but the claims for breach of contract. The judge applied the four-year statute of limitations under Indiana’s Uniform Commercial Code (UCC), holding that the two agreements are mixed contracts for goods and services, but the goods (i.e., the software) predominate. The Seventh Circuit disagreed. Under Indiana’s “predominant thrust” test for mixed contracts, the agreements in question fall on the “services” side of the line, so the UCC does not apply. The breach-of-contract claims are subject to Indiana’s 10-year statute of limitations for written contracts and are timely. Pain Center licensed SSIMED’s preexisting, standardized software but received monthly billing and IT services for the life of both contracts. View "Pain Center of SE Indiana, LLC v. Origin Healthcare Solutions LLC" on Justia Law

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Arla, a Denmark-based global dairy conglomerate, launched a $30 million advertising campaign aimed at expanding its U.S. cheese sales, branded “Live Unprocessed.” The ads assure consumers that Arla cheese contains no “weird stuff” or “ingredients that you can’t pronounce,” particularly, no milk from cows treated with recombinant bovine somatotropin (“rbST”), an artificial growth hormone. The flagship ad implies that milk from rbST-treated cows is unwholesome. Narrated by a seven-year-old girl, the ad depicts rbST as a cartoon monster with razor-sharp horns. Elanco makes the only FDA-approved rbST supplement. Elanco sued, alleging that the ads contain false and misleading statements in violation of the Lanham Act. Elanco provided scientific literature documenting rbST’s safety, and evidence that a major cheese producer had decreased its demand for rbST in response to the ads. The Seventh Circuit affirmed the issuance of a preliminary injunction, rejecting arguments that Elanco failed to produce consumer surveys or other reliable evidence of actual consumer confusion and did not submit adequate evidence linking the ad campaign to decreased demand for its rbST. Consumer surveys or other “hard” evidence of actual consumer confusion are unnecessary at the preliminary-injunction stage. The evidence of causation is sufficient at this stage: the harm is easily traced because Elanco manufactures the only FDA-approved rbST. The injunction is sufficiently definite and adequately supported by the record and the judge’s findings. View "Eli Lilly and Co. v. Arla Foods USA, Inc." on Justia Law

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Plaintiffs defaulted on credit cards. PRA, an Illinois debt collection agency, bought the accounts for collection. Debtors Legal Clinic sent separate letters on behalf of each plaintiff to PRA, stating “the amount reported is not accurate.” PRA later reported each debt to credit reporting agencies without noting that the debt was “disputed.” Plaintiffs each filed a suit under the Fair Debt Collection Practices Act, 15 U.S.C. 1692e(8), alleging that PRA communicated their debts to credit reporting agencies without indicating they had disputed the debt. The Seventh Circuit affirmed summary judgment in favor of plaintiffs. PRA’s alleged violation of section 1692e(8) is sufficient to show an injury‐in‐fact; the plaintiffs suffered “a real risk of financial harm caused by an inaccurate credit rating.” The court rejected PRA’s argument that the phrase “the amount reported is not accurate” was ambiguous. Section 1692e(8) does not require the use of the word “dispute.” The “knows or should know” standard of section 1692e(8) “requires no notification by the consumer … and instead, depends solely on the debt collector’s knowledge that a debt is disputed, regardless of how that knowledge is acquired.” The court concluded that PRA’s error was material. View "Bowse v. Portfolio Recovery Associates, LLC" on Justia Law