Justia U.S. 4th Circuit Court of Appeals Opinion Summaries

Under Armour, a publicly traded sports apparel company, faced significant legal claims and government investigations over its financial forecasts and accounting practices following the bankruptcy of a major customer, Sports Authority, in 2016. Shareholders alleged that Under Armour made misleading public statements about its financial prospects and that company insiders sold stock at inflated prices. These allegations led to a federal securities class action, derivative demands, and eventually an SEC investigation into whether Under Armour manipulated its accounting by pulling forward revenue to maintain the appearance of strong growth.In the United States District Court for the District of Maryland, Under Armour’s insurers sought a declaratory judgment, arguing that the securities litigation, derivative actions, and government investigations constituted a single claim under the terms of Under Armour’s directors and officers insurance policies and therefore were subject only to the coverage limit of the earlier policy period. Under Armour countered that the government investigations were a separate claim, entitling it to an additional $100 million in coverage under a subsequent policy. The district court sided with Under Armour, finding that the government investigations and the earlier shareholder claims were not sufficiently related to constitute a single claim under the policy’s language.The United States Court of Appeals for the Fourth Circuit reviewed the district court’s decision de novo. The Fourth Circuit held that, under the plain meaning of the 2017–2018 insurance policy’s “single claims” provision, the claims related to Under Armour’s public financial statements and its accounting practices were “logically or causally related” and thus constituted a single claim. As a result, only the coverage limits from the earlier, 2016–2017 policy period applied. The Fourth Circuit reversed the district court’s judgment in favor of Under Armour. View "Navigators Insurance Co. v. Under Armour, Inc." on Justia Law

Cherry Grove Beach Gear, LLC, operated by Derek and Jacqueline Calhoun, began providing beach equipment rentals and setup services on public beaches in the City of North Myrtle Beach, South Carolina, starting in 2020. The City informed CGBG that its activities violated local ordinances, but the company continued operating despite repeated warnings and complaints from competitors. In response, the City enacted a new ordinance in June 2022 that explicitly restricted professional setup of beach equipment on City beaches to City officials only. CGBG persisted with its services and received several citations for noncompliance.Following these actions, CGBG filed a lawsuit in the United States District Court for the District of South Carolina, alleging that the City had unlawfully established a monopoly over beach equipment rentals and setup services, violating federal antitrust law. The district court granted summary judgment in favor of the City, determining that the municipal ordinances qualified for state action immunity from federal antitrust liability under the Parker doctrine, based on relevant South Carolina statutes.On appeal, the United States Court of Appeals for the Fourth Circuit reviewed the district court’s decision de novo. The Fourth Circuit held that the South Carolina statutes in question clearly articulated and affirmatively expressed state policy allowing municipalities to create exclusive franchises for beach equipment rentals and setup, and that the anticompetitive effects were a foreseeable result of this legislative authorization. The court also rejected CGBG’s argument for a “market participant exception” to state action immunity, noting that precedent does not recognize such an exception. Consequently, the Fourth Circuit concluded that the City is entitled to state action immunity and affirmed the district court’s judgment. View "Cherry Grove Beach Gear, LLC v. City of North Myrtle Beach" on Justia Law

A company developed a specialized vehicle-mounted stairway, with design work primarily performed by the founder’s son, who was promised equity in the business but never received it due to the majority owner’s repeated refusals. The son, with his father’s assistance, eventually obtained a patent for the design, which he used as leverage to seek compensation. Negotiations between the parties failed, leading to the father’s removal as company president and the company filing suit against both the father and son. The company alleged breach of fiduciary duty, misappropriation of trade secrets, business conspiracy, unjust enrichment, fraud, and breach of contract, while the son counterclaimed for patent infringement.The United States District Court for the Eastern District of Virginia granted summary judgment to the father and son on all claims except a breach of contract claim against the father and the son’s patent counterclaim. The court found most claims time-barred or unsupported by evidence, and later, the company voluntarily dismissed its remaining claim. The son’s patent was invalidated by a jury. The district court also awarded attorneys’ fees and costs to the father as the prevailing party under the company’s operating agreement.The United States Court of Appeals for the Fourth Circuit reviewed the case de novo and affirmed the district court’s rulings. The appellate court held that the company’s claims were either time-barred under the applicable statutes of limitations or failed on the merits, as there was no evidence the son benefited from the patent or that he had signed a non-disclosure agreement. The court also affirmed the award of attorneys’ fees and costs to the father, finding no error in the district court’s application of Delaware law or its determination of the prevailing party. View "Mission Integrated Technologies, LLC v. Clemente" on Justia Law

A group of employees at a wealth management firm in Richmond, Virginia, decided to leave their employer and establish a competing business. These employees, who had access to proprietary client information, had signed employment agreements with their former employer that included non-solicitation and confidentiality clauses. The agreements also addressed the industry-wide Protocol for Broker Recruiting, which generally allows departing financial advisors to take certain client information and solicit former clients if specific procedures are followed. However, the agreements stated that their terms would control over the Protocol in the event of any conflict. After resigning, the employees formed a new firm and began contacting their former clients, resulting in the loss of hundreds of accounts and significant assets for their previous employer.The United States District Court for the Eastern District of Virginia granted a preliminary injunction in favor of the former employer, barring the former employees and their new firm from contacting former clients or using confidential information. The district court found a strong likelihood of success on the merits of the trade secrets claims against all defendants, reasoning that even under the Protocol, the defendants’ conduct constituted impermissible “raiding.” The court also found that the employer would likely suffer irreparable harm and that the balance of equities and public interest favored injunctive relief.On appeal, the United States Court of Appeals for the Fourth Circuit reviewed the district court’s interpretation of the Protocol and the employment agreements. The Fourth Circuit held that the Protocol’s “raiding” exception applies only to actions by outside firms targeting another firm’s employees, not to employees leaving to form their own business. The court concluded that the employment agreements, not the Protocol, governed the former employees’ conduct and supported the injunction against them. However, because the new firm was not a party to those agreements, the injunction as to the new firm was vacated. Thus, the Fourth Circuit affirmed the injunction against the former employees but vacated it as to the new firm. View "Salomon & Ludwin, LLC v. Winters" on Justia Law

Plaintiffs filed a class action lawsuit in state court against Defendants, alleging violations of state securities laws. Defendants removed the case to federal court under the Securities Litigation Uniform Standards Act (SLUSA), arguing that the case involved covered securities. Plaintiffs amended their complaint to exclude any claims related to covered securities, leading the district court to remand the case to state court. After three years of state court litigation, Defendants removed the case again, citing an expert report that allegedly identified covered securities. The district court remanded the case again and awarded Plaintiffs $63,007.50 in attorneys' fees.The United States District Court for the District of South Carolina initially denied Plaintiffs' motion to remand but later granted it after Plaintiffs amended their complaint. The court found that the amended complaint excluded any claims related to covered securities, thus SLUSA did not apply, and no federal question remained. After Defendants removed the case a second time, the district court remanded it again and awarded attorneys' fees, finding the second removal lacked a reasonable basis.The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's award of attorneys' fees. The court held that the second removal was improper because the amended complaint explicitly excluded claims related to covered securities, and thus SLUSA did not apply. Additionally, the court found that the removal was objectively unreasonable, as the district court had already addressed the issues in its first remand order. The Fourth Circuit also denied Plaintiffs' request for additional attorneys' fees for defending the appeal, stating that 28 U.S.C. § 1447(c) does not authorize fee awards on appeal. View "Black v. Mantei & Associates, Ltd." on Justia Law

Sysco Machinery Corporation, a Taiwanese company, accused DCS USA Corporation, a North Carolina company, of business torts related to their manufacturer-distributor relationship. Sysco alleged that after some of its employees left to form a competitor, Cymtek Solutions, Inc., DCS sold machines made by Cymtek using Sysco's confidential information. Sysco claimed these diverted contracts were worth millions of dollars.Sysco first filed suit in Taiwan, where it claims to have won a preliminary injunction against Cymtek. Sysco then filed a suit in the Eastern District of North Carolina, which it voluntarily dismissed, followed by a suit in the District of Massachusetts, which was dismissed. Finally, Sysco returned to the Eastern District of North Carolina, where it brought claims for trade secret misappropriation, copyright infringement, unfair and deceptive trade practices, and tortious interference with prospective economic advantage. The district court dismissed all claims under Rule 12(b)(6) for failure to state a claim and denied Sysco's post-judgment leave to amend its complaint.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court affirmed the district court's dismissal of Sysco's trade secret misappropriation claim, finding that Sysco did not plausibly allege the existence of a valid trade secret or that DCS misappropriated it. The court also affirmed the dismissal of Sysco's other claims, noting that Sysco did not sufficiently develop its arguments for copyright infringement, unfair and deceptive trade practices, and tortious interference with prospective economic advantage. Finally, the court upheld the district court's denial of Sysco's motion to alter or amend the judgment and for leave to amend the complaint, citing Sysco's repeated failure to state a claim and the potential prejudice to DCS. View "Sysco Machinery Corp. v. DCS USA Corp." on Justia Law

Two racing teams, 2311 Racing LLC and Front Row Motorsports, Inc., filed an antitrust lawsuit against the National Association for Stock Car Auto Racing, LLC (NASCAR) and its CEO, James France. The plaintiffs alleged that NASCAR, as a monopolist, required them to sign a release for past conduct as a condition of participating in the NASCAR Cup Series, which they claimed was anticompetitive. The plaintiffs sought declaratory and injunctive relief, as well as treble damages.The United States District Court for the Western District of North Carolina granted the plaintiffs' motion for a preliminary injunction. The court ordered NASCAR to allow the plaintiffs to participate in the Cup Series under the 2025 Charter Agreement terms, excluding the release provision. The district court found that the plaintiffs were likely to succeed on their Section 2 Sherman Act claim, concluding that a monopolist could not require a release from antitrust claims as a condition of doing business.The United States Court of Appeals for the Fourth Circuit reviewed the case and vacated the preliminary injunction. The appellate court held that the district court's theory of antitrust law was unsupported by any case law. The court found that the release provision did not constitute anticompetitive conduct and that the plaintiffs failed to show a likelihood of success on the merits. The Fourth Circuit emphasized that a preliminary injunction is an extraordinary remedy requiring a clear showing of entitlement, which the plaintiffs did not meet. The court concluded that the district court abused its discretion in granting the preliminary injunction. View "2311 Racing LLC v. National Association for Stock Car Auto Racing" on Justia Law

Plaintiffs Anthony D’Armiento and Susan Scharpf filed a class action lawsuit against several major shipbuilders and naval-engineering consultancies, alleging a "no-poach" conspiracy to suppress wages by agreeing not to recruit each other’s employees. The plaintiffs, who had not worked for any defendant since 2013, claimed that this conspiracy was concealed through a "non-ink-to-paper" agreement, which they only discovered in April 2023 through an investigation.The United States District Court for the Eastern District of Virginia dismissed the case, ruling that it was barred by the Sherman Act’s four-year statute of limitations. The court found that the alleged "non-ink-to-paper" agreement did not constitute an affirmative act of fraudulent concealment that would toll the limitations period.The United States Court of Appeals for the Fourth Circuit reviewed the case and reversed the district court’s decision. The appellate court held that an agreement deliberately kept unwritten to avoid detection could qualify as an affirmative act of concealment. The court emphasized that fraudulent concealment can include acts of omission, such as avoiding the creation of written evidence. The court found that the plaintiffs had adequately alleged that the defendants engaged in affirmative acts of concealment by maintaining a secret, unwritten no-poach agreement.The Fourth Circuit concluded that the plaintiffs’ allegations met the relaxed Rule 9(b) standard for pleading fraudulent concealment with particularity. The court also determined that the plaintiffs had sufficiently alleged due diligence, as they were not on inquiry notice of the conspiracy until the investigation in 2023. The case was reversed and remanded for further proceedings. View "Scharpf v. General Dynamics Corporation" on Justia Law

IonQ, Inc., a public company developing quantum computers, experienced a significant drop in its stock price from $7.86 on May 2, 2022, to $4.34 on May 12, 2022. A group of investors claimed this decline was due to the Scorpion Report, published on May 3, 2022, which alleged that IonQ had been committing widespread fraud regarding the value of its company. The investors filed a securities fraud lawsuit against IonQ, asserting that the report revealed the truth about IonQ's misrepresentations, causing their financial losses.The United States District Court for the District of Maryland dismissed the investors' first amended complaint for failing to state a claim, particularly for not adequately pleading loss causation. The court found that the Scorpion Report, authored by a short-seller with financial incentives, was not a reliable source of information. The court also noted that the investors failed to show that the report or IonQ's response revealed any new, truthful information to the market. The investors then sought reconsideration and leave to file a second amended complaint, which the district court denied, again citing the failure to plead loss causation.The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's decision. The appellate court agreed that the Scorpion Report, given its disclaimers and the financial motivations of its authors, could not plausibly be seen as revealing the truth about IonQ's alleged fraud. Additionally, IonQ's response to the report did not concede any truth to the allegations but rather dismissed them as inaccurate. Therefore, the investors failed to establish the necessary element of loss causation, making their proposed amendments futile. The court affirmed the district court's judgment. View "Defeo v. IonQ, Inc." on Justia Law

Studco Building Systems US, LLC, a metal fabricator, regularly purchased steel from Olympic Steel, Inc. and paid invoices via ACH payments. In October 2018, Studco received a fraudulent email, purportedly from Olympic, instructing it to redirect payments to a new account at 1st Advantage Federal Credit Union. Studco complied, transferring over $550,000 to the scammers' account. The scammers were never identified, and Studco bore the loss.The United States District Court for the Eastern District of Virginia held a bench trial and ruled in favor of Studco, awarding it $558,868.71 plus attorney fees and costs. The court found 1st Advantage liable under Virginia Code § 8.4A-207 for failing to act in a commercially reasonable manner and for breach of bailment. The court concluded that 1st Advantage should have detected the misdescription of the account name and number.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court reversed the district court's judgment on the misdescription claim, holding that under Virginia Code § 8.4A-207, a bank is not liable for depositing funds into an account based on the account number provided, unless it has actual knowledge of a misdescription. The court found no evidence that 1st Advantage had actual knowledge of the misdescription. The court also reversed the judgment on the bailment claim, stating that a general deposit in a bank does not create a bailment under Virginia law. The court affirmed the district court's denial of punitive damages to Studco.The Fourth Circuit's main holding was that 1st Advantage was not liable under § 8.4A-207 because it lacked actual knowledge of the misdescription, and no bailment was created by the ACH deposits. The case was remanded with instructions to enter judgment in favor of 1st Advantage. View "Studco Building Systems US, LLC v. 1st Advantage Federal Credit Union" on Justia Law