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

Articles Posted in Business Law
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A massage parlor, Elegant Massage LLC, filed a class action lawsuit against State Farm Mutual Automobile Insurance Company, asserting claims of breach of contract and other related claims. The suit stemmed from State Farm's denial of insurance coverage to businesses that had to shut down partially or fully due to Virginia executive orders during the COVID-19 pandemic. Elegant Massage claimed that the forced closure constituted a "direct physical loss" under its insurance policy. The district court certified the class and denied State Farm’s motion to dismiss. State Farm appealed.The United States Court of Appeals for the Fourth Circuit used its pendent appellate jurisdiction to review the district court's denial of State Farm’s motion to dismiss in conjunction with the appealable class certification order. The appellate court referred to the precedent set in Uncork & Create LLC v. Cincinnati Insurance Co., which held that a similar business closure during the pandemic did not constitute a "direct physical loss" requiring material destruction or harm to the property. The court found that this precedent was directly applicable to the case at hand.Consequently, the court of appeals held that the district court had erred in denying State Farm's motion to dismiss. It ruled that the temporary closures ordered by the executive did not result in a "direct physical loss" under the policy terms. As a result, the court also found no basis for class certification. The court reversed the district court’s decisions and instructed it to dismiss the entire case. View "Elegant Massage, LLC v. State Farm Mutual Automobile Insurance Co." on Justia Law

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In this case, a South Carolina court-appointed receiver brought an action against Travelers Casualty and Surety Company and other insurers, alleging breaches of insurance policies issued to a defunct company within a state receivership. Travelers removed the action to federal court, asserting diversity jurisdiction. However, the district court granted the receiver’s motion to remand the case back to state court. The court held that it lacked subject-matter jurisdiction because the case involved property of a state receivership exclusively under the jurisdiction of the state court (based on the doctrine articulated in Barton v. Barbour), and the removal lacked unanimous consent of all defendants due to a forum selection clause in some of the insurance policies issued to the defunct company.Upon appeal, the United States Court of Appeals for the Fourth Circuit dismissed the appeal, holding that the district court's conclusions in support of remand were at least colorably supported. The court found that the district court's reliance on a lack of subject-matter jurisdiction and procedural defect as grounds for remand were colorably supported, and thus, not reviewable under 28 U.S.C. § 1447(d). The court also concluded that it lacked jurisdiction to review the district court's remand order and dismissed the appeal. View "Protopapas v. Travelers Casualty and Surety Co." on Justia Law

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In a dispute between SmartSky Networks, LLC and DAG Wireless, Ltd., DAG Wireless USA, LLC, Laslo Gross, Susan Gross, Wireless Systems Solutions, LLC, and David D. Gross over alleged breach of contract, trade secret misappropriation, and deceptive trade practices, the United States Court of Appeals for the Fourth Circuit ruled that the district court did not have the jurisdiction to enforce an arbitration award. Initially, the case was stayed by the district court pending arbitration. The arbitration tribunal found in favor of SmartSky and issued an award, which SmartSky sought to enforce in district court. The defendants-appellants argued that, based on the Supreme Court decision in Badgerow v. Walters, the district court lacked subject matter jurisdiction to enforce the arbitration award. The Fourth Circuit agreed, noting that a court must have a basis for subject matter jurisdiction independent from the Federal Arbitration Act (FAA) and apparent on the face of the application to enforce or vacate an arbitration award. The court concluded that the district court did not have an independent basis of subject matter jurisdiction to confirm the arbitration award. As such, the court reversed and remanded the case to the district court for further proceedings. View "Smartsky Networks, LLC v. DAG Wireless, LTD." on Justia Law

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In the case, Remy Holdings International, LLC ("Remy") sued Fisher Auto Parts, Inc. ("Fisher") after Fisher terminated their business relationship and sold its inventory to a different manufacturer. Remy claimed that Fisher wrongfully terminated their agreement and that the inventory Fisher sold belonged to Remy. Remy brought claims for breach of contract, unjust enrichment, and conversion. Fisher counterclaimed for breach of contract due to Remy's poor performance.The United States Court of Appeals for the Fourth Circuit affirmed the district court's decisions, which were all in Fisher's favor. The court found that Remy committed the first material breach of the contract by failing to keep Fisher competitive in the marketplace. Furthermore, Fisher did not waive its right to assert the first material breach defense by continuing to order from Remy and occasionally waiving the order-fill penalty. Therefore, Remy was precluded from enforcing the contract and its breach of contract claim related to ownership of the inventory was dismissed.The court also rejected Remy's argument that the district court should have reinstated its unjust enrichment claim after declaring its contractual rights unenforceable. Remy had failed to respond to Fisher's motion for summary judgment seeking the dismissal of the unjust enrichment claim, and as a result, forfeited any opposition to its dismissal.Lastly, the court found no error with the district court's evidentiary rulings, including the admission of expert testimony and the USA Core Policy, and its refusal to instruct the jury on certain defenses. View "Remy Holdings International, LLC v. Fisher Auto Parts, Inc" on Justia Law

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In this case between Norfolk Southern Railway Company and Zayo Group, LLC, the United States Court of Appeals for the Fourth Circuit affirmed the district court's judgment on the pleadings. The dispute arose from a lease agreement between the parties, in which Zayo leased a utility duct from Norfolk Southern. When the time came to renew the lease, the parties could not agree on the renewal rent and referred the dispute to three appraisers, as specified in the lease. The appraisers decided the rent by a two-to-one vote, but Zayo refused to pay the rent, arguing that the decision was not unanimous. Norfolk Southern sued for breach of the lease, and the district court entered judgment for Norfolk Southern, ordering Zayo to pay the rental amount determined by the appraisers. Zayo appealed, contending that the appraisers could determine the rent only by unanimous vote. The Fourth Circuit held that the lease's language was unambiguous and did not impose a unanimity requirement on the appraisers. Therefore, it found that Zayo breached the lease by refusing to pay the full amount determined by the appraisers. The court affirmed the district court's judgment, requiring Zayo to pay the rental amount determined by the appraisers. View "Norfolk Southern Railway Company v. Zayo Group, LLC" on Justia Law

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In the case before the United States Court of Appeals for the Fourth Circuit, the defendant, Brent Brewbaker, appealed from his conviction of a per se antitrust violation under § 1 of the Sherman Act, as well as five counts of mail and wire fraud. Brewbaker had asked the district court to dismiss the Sherman Act count for failure to state an offense, but the court denied his motion. The court of appeals reversed Brewbaker’s Sherman Act conviction, finding that the indictment failed to state a per se antitrust offense as it purported to do. The court, however, affirmed his fraud convictions and remanded the case for resentencing.The legal basis for the case was Brewbaker's argument that the indictment should have been dismissed because it did not state a per se Sherman Act offense, a claim that the appellate court agreed with. The court explained that the indictment alleged a restraint that was both horizontal and vertical in nature, which does not fit neatly into either category as per existing case law. The court further noted that the Supreme Court had not yet clarified how to analyze an agreement between two parties with both vertical and horizontal aspects. The court concluded that the indictment did not allege a restraint that has been previously held to be per se illegal, nor one that economics showed would invariably lead to anticompetitive effects, and thus failed to state a per se violation of the Sherman Act.The court also rejected Brewbaker's claim that the jury instructions on the Sherman Act count "infected" the jury’s consideration of the fraud counts, noting that the fraud counts were not dependent on finding Brewbaker guilty under the Sherman Act. It further cited the presumption that juries follow instructions, and found no extraordinary situation to overcome this presumption. Therefore, the fraud convictions were affirmed. View "US v. Brent Brewbaker" on Justia Law

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This case arose when two companies merged in the biopharmaceutical market. Biopharmaceutical companies develop medicines from living cells. Those medicines must be tested and then approved by the Food and Drug Administration before they can be publicly marketed. The two companies here—INC Research Holdings, Inc. and inVentiv Health, Inc.—did not develop their own medicines, but helped other companies that did. Pre-merger, INC Research specialized in assisting biopharmaceutical companies conduct clinical trials as part of the Food and Drug Administration’s approval process. Wanting to break into the approved-drugcommercialization market, INC Research sought to merge with inVentiv in 2017. Plaintiffs claim that they relied on allegedly misleading statements that INC Research and its executives made in three different communications: (1) the press release announcing the merger; (2) an earnings call held on May 10; and (3) an earnings call held on July 27. The district court dismissed Plaintiffs’ case for failure to state a claim.   The Fourth Circuit affirmed. The court explained that INC Research’s investors have a right to be disappointed that their company’s performance did not meet its optimistic projections. But that does not mean that they also have a right to civil remedies under federal securities law. Securities fraud liability cannot be “predicated solely on an overly optimistic view of a future which may, in fact, encounter harsh economic realities down the road.” View "San Antonio Fire & Police Pension Fund v. Syneos Health Inc." on Justia Law

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This dispute involves several insurers and one defendant insurer’s alleged duty to defend a lawsuit brought against a general contractor of a residential building project. The district court entered partial summary judgment, holding that the defendant insurer had a duty to defend the general contractor in the underlying action for construction defects. The court also issued a stay of other issues raised by the parties, and administratively closed the case. After the defendant insurer filed the present appeal, the underlying action was resolved in a settlement agreement.   The Fourth Circuit concluded that it lacks jurisdiction to consider the present interlocutory appeal challenging the defendant insurer’s duty to defend the general contractor. Therefore, the court dismissed the appeal. The court explained that while the relief granted in the district court’s order originally may have been prospective in nature, the resolution of the underlying action has eliminated from that order any forward-looking mandate. Thus, the court explained that the order before the court in this appeal currently lacks the character of an injunction and does not require the court to consider any question separate from issues that may be appealed after entry of a final judgment in the district court. View "Westfield Insurance Company v. Selective Insurance Company" on Justia Law

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CSX Transportation, Inc. (“CSXT”) issued furlough notices to employees at its facility in Huntington, West Virginia. Shortly thereafter, over 65 employees submitted forms requesting to take medical leave based on claimed minor soft-tissue injuries sustained while off duty. The forms were similar in content; all were signed by one of two chiropractors; and all called for medical leave of eight weeks or more.Under CSXT’s benefit plans, if an employee were furloughed while on medical leave, the employee would receive health and welfare benefits for up to two years. Otherwise, a furloughed employee would receive such benefits for only four months. Suspecting benefits fraud, CSXT charged the employees with violating its workplace rule against dishonesty and, following hearings, terminated their employment.Plaintiffs, a group of 58 terminated employees, claimed violations of their rights under federal and state law, including violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), the Rehabilitation Act of 1973, the West Virginia Human Rights Act, and the Family and Medical Leave Act of 1993 (“FMLA”). The district court granted summary judgment to CSXT on all claims and Plaintiffs appealed.The Fourth Circuit affirmed, finding that Employer's belief that Plaintiff employees committed benefits fraud was a legitimate and nondiscriminatory reason for terminating Plaintiffs and that Plaintiffs couldn't prove pretext or retaliation. View "Justin Adkins v. CSX Transportation, Inc." on Justia Law

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Both Risk Based Security, Inc. (“RBS”) and Synopsys, Inc., identify vulnerabilities in the source code of software and share information about those vulnerabilities so they can be corrected before nefarious individuals exploit them. After RBS accused Synopsys of engaging in unlawful conduct related to the content of RBS’ vulnerability database, Synopsys filed this declaratory judgment action. In relevant part, Synopsys sought a judicial declaration that it had not misappropriated RBS’ trade secrets. On the merits, the district court granted Synopsys’ motion for summary judgment on that claim after concluding that RBS had not come forward with evidence showing that any of its alleged trade secrets satisfied the statutory definition of that term. RBS appealed by challenging the district court’s merits determination of trade secrets as well as its decisions denying RBS’ motion to dismiss the case as moot, excluding testimony from two of RBS’ expert witnesses, and denying its motion for partial summary judgment as to some of its trade secret claims.   The Fourth Circuit affirmed. The court explained that the district court properly concluded that RBS failed to put forward admissible evidence showing that the seventy-five alleged trade secrets had independent economic value. Absent proof sufficient to satisfy that part of the statutory definition of a “trade secret,” RBS could not prevail in a misappropriation-of-trade-secrets claim, and the district court properly granted summary judgment to Synopsys. Given this holding, the court wrote, it need not consider RBS’ additional argument that the district court erred in denying its motion for partial summary judgment. View "Synopsys, Inc. v. Risk Based Security, Inc." on Justia Law