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

While working for Adnet, Inc. (“Adnet”), Defendants learned of a subcontract that Adnet was attempting to win. Thereafter, Defendants, through their own company, submitted a bid for that same subcontract. After Defendants won the subcontract, Adnet brought claims against them for breach of the duty of loyalty, tortious interference with a business relationship, and business conspiracy. The district court granted Defendants’ motion for summary judgment, concluding that Defendants did not compete against Adnet, that Adnet did not have a business expectancy in the subcontract, and that, without proof of an underlying tort, there was no business conspiracy. Adnet appealed.   The Fourth Circuit reversed the district court’s grant of summary judgment to Defendants on Adnet’s claims for breach of the duty of loyalty and tortious interference with a business relationship. Further, the court vacated the district court’s grant of summary judgment to Defendants on Adnet’s business conspiracy claim and remanded. The court explained that there is sufficient evidence of a direct competition for the subcontract between Adnet and Defendants while they were working for Adnet to bar a grant of summary judgment to Defendants. A reasonable juror could conclude that employees, like Defendants, breach their duty of loyalty to their employer when they learn of a potential business opportunity through their employment and then participate in direct competition with their employer for that opportunity while still employed. View "Adnet, Inc. v. Rohit Soni" on Justia Law

Plaintiff was on active duty with the United States Army. He bought a car from Select Cars of Thornburg in Fredericksburg, Virginia, and financed his purchase with a loan from United Auto Credit Corporation. The loan financed not only the car’s cost but also the cost of Guaranteed Asset Protection. Guaranteed Asset Protection is like extra insurance, covering any amount still due on the car loan after auto insurance is paid out if the car is totaled or stolen. Plaintiff’s claims arise from this single loan. This loan, Plaintiff alleged, violated the Military Lending Act because the loan agreement mandated arbitration and failed to disclose certain information. The district court dismissed the case, holding that the loan was not covered by the Act at all.   The Fourth Circuit affirmed. The court explained that a statutory provision must be given the ordinary meaning it had when it was enacted. Relevant dictionaries, carefully considered, sometimes shed light on that ordinary meaning. Yet here, dueling dictionaries provide more than one linguistically permissible meaning.  But by examining the relevant phrase in its statutory context. This context shows that while “the express purpose” can be used in different senses, it is best read in Section 987(i)(6) to mean the specific purpose. This loan was offered for the specific purpose of financing Plaintiff’s car purchase. And that satisfies Section 987(i)(6)’s relevant condition and the Act is inapplicable. View "Jerry Davidson v. United Auto Credit Corporation" on Justia Law

Defendant challenged the district court’s disgorgement order against him and Owings Group, LLC, the entity he founded and controlled. Together, Defendant, Owings, and three codefendants perpetrated a fraudulent scheme in violation of federal securities laws. After Defendant consented to an entry of judgment, the court ordered him to disgorge $681,554 and imposed a monetary penalty in the same amount.Defendant argued that the disgorgement order violates Liu v. SEC, 140 S. Ct. 1936 (2020) and that the district court erroneously premised the associated monetary penalty on joint-and-several liability. The Fourth Circuit affirmed the district court’s disgorgement order and its monetary penalty.The court explained that it agreed with the district court that Defendant and Owings were “partners engaged in concerted wrongdoing". The court wrote that Owings’s conduct in the scheme generated its ill-gotten gains—and Defendant controlled that conduct. Further, the district court didn’t order a joint-and-several penalty. It ordered a penalty equal to Defendant's disgorgement, which happened to be joint and several.Finally, the court concluded that it found no abuse of discretion. Though the district court didn’t explicitly discuss Defendant's financial situation, it’s clear to the court that the district court considered it, along with the remaining factors. The district court understood that all the defendants were insolvent but decided that Defendant's substantially more serious role in the scheme warranted a penalty all the same. View "SEC v. Mark Johnson" on Justia Law

Infinity Business Group used an accounting practice that artificially inflated its accounts receivable and therefore its revenues. The company’s CEO, board of directors, and outside auditors affirmed the wrongdoing. Appellant, the company’s trustee, alleges that the true mastermind was a financial services company and an adviser of the company (“Defendants”) that Infinity contracted with to unsuccessfully solicit investments.The Fourth Circuit held that even assuming that the financial services company played some role in creating or perpetuating the flawed accounting technique, Appellant still cannot succeed in holding Defendants liable. Infinity engaged Defendant for the limited purpose of assisting with “a private placement of” Infinity stock. Defendants’ task was to help prepare a confidential information memorandum for potential investors, which was to include Infinity’s financial information from 2003 to 2005. Infinity’s CEO prepared and provided the relevant information for all three years. The accounting practice the company used was inconsistent with the generally accepted accounting principles endorsed by the Securities and Exchange Commission.Appellant first contends that he represents Infinity as well as Infinity’s creditors. Thus, when he was acting on behalf of the presumptively blameless creditors, Appellant insists he is immune from in pari delicto. The court held that when a trustee pursues a right of action that ultimately derives from the debtor—even if the trustee is nominally exercising a creditor’s powers when doing so—the trustee remains subject to the same defenses as the debtor. The court ultimately found that Infinity’s officers and auditors were the authors of the company’s demise—not Defendants. View "Robert F. Anderson v. Morgan Keegan & Company, Inc." on Justia Law

Certain members of the The U.S. Tobacco Cooperative(“Cooperative”) seek dissolution of the Cooperative and distribution of its reserves. They claim that “the Cooperative is no longer fulfilling the mandates under which it was created” and “is no longer able to carry out its purpose.” According to the members, the Cooperative simply cannot keep up with market realities and they request the judicial dissolution of the Cooperative.The Cooperative argued that the ground for which the members seek dissolution—that the Cooperative can no longer carry out its purpose—only applies to dissolution under North Carolina’s Nonprofit Corporation Act (“Nonprofit Corporation Act”). The key issue underlying the Cooperative’s motion to dismiss was whether the Business Corporation Act or the Nonprofit Corporation Act applied to the Cooperative’s dissolution. The members argue that the Nonprofit Corporation Act, not the Business Corporation Act, applies to judicially dissolve the Cooperative.The court found the members fail to explain why applying the Business Corporation Act’s dissolution provisions here would contradict the statute’s “so far as appropriate” language. Therefore, the court determined that since the Cooperative is organized “with capital stock,” the Business Corporation Act governs the Cooperative’s dissolution. The Business Corporation Act does not list the failure of a corporation to carry out its purposes as a ground for dissolution. But that is the only ground the members addressed on appeal. Thus, the court affirmed the district court’s dismissal of the members’ claim for judicial dissolution. View "Teresa Speaks v. U. S. Tobacco Cooperative" on Justia Law

Puma, a pharmaceutical company, created an investor presentation during a proxy contest with Eshelman, a Puma shareholder and the founder of PPD, another pharmaceutical company. Puma invited its shareholders to visit a link on its website where it had published the presentation, which indicated that, a decade earlier, while Eshelman was CEO of PPD, a clinical investigator falsified documents. The presentation was published at least 198 times. Puma also filed the presentation with the SEC, which made it permanently accessible on its website.Eshelman, a resident of North Carolina, initiated a diversity action with state-law claims of defamation. Puma is incorporated in Delaware and has its principal place of business in California; Auerbach, Puma’s CEO, resides in California. The court found defamatory per se Puma’s statements that Eshelman was “involved in clinical trial fraud” and that Eshelman was replaced as CEO after being forced to testify regarding fraud in 2008. A jury awarded Eshelman $15.85 million in compensatory damages and $6.5 million in punitive damages.The Fourth Circuit affirmed as to liability but vacated the award after finding that Puma waived its personal jurisdiction claim. Each of the statements at issue is capable of a singular, defamatory interpretation but “there is no evidence justifying such an enormous award.” View "Eshelman v. Puma Biotechnology, Inc." on Justia Law

In 2012, Bishop Lawrence sought to disaffiliate his South Carolina-based diocese from the Episcopal “Mother Church”. Some parishes followed suit. The Mother Church purported to remove Lawrence and selected a new bishop. The Disassociated Diocese and Parishes sued the Mother Church to clarify their property rights in diocesan. The Mother Church filed counterclaims and separately filed trademark and false-advertising claims. Both cases are ongoing.The Church Insurance Company, wholly owned by the Church Pension Fund, is a freestanding nonprofit affiliated with the Mother Church. Captive insurance companies may only cover the risks of their parent companies and related entities. Before the schism, the Company issued a Diocesan Program Master Policy, listing as “named insured” the Episcopal diocese and listing 56 participant parishes, including the now-Disassociated Parishes, in its declarations. Each parish has a separate, individualized insurance policy and paid premiums directly to the Company. The policies provide liability coverage for injuries arising out of “infringement of copyright, title, slogan, trademark, or trade name” and include a broad duty to defend. The Company has reimbursed the Disassociated Parishes’ defense costs in connection with both lawsuits.The Associated Diocese sued the Company, alleging breach of contract, bad faith, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty. The Fourth Circuit affirmed the dismissal of that suit for lack of standing. The Company has not strayed beyond its limitations as a captive insurer or breached its obligations under the policies, so there is no injury traceable to such conduct. View "Episcopal Church in South Carolina v. Church Insurance Company of Vermont" on Justia Law

JELD-WEN's customers, Steves and Sons, filed suit challenging JELD-WEN's acquisition of a competitor. After a jury found that the merger violated the Clayton Antitrust Act and that Steves and Sons was entitled to treble damages, the district court granted Steves and Sons' request to unwind the merger and plans to hold an auction for the merged assets after this appeal. The district court then held another trial before a different jury on JELD-WEN's countersuit against Steves and Sons for trade secret misappropriation, allowing three individuals to intervene in the case. The jury ruled in favor of Steves and Sons on most of JELD-WEN's claims and entered judgment for the intervenors.The Fourth Circuit concluded that the district court properly declined to grant JELD-WEN judgment as a matter of law on whether Steves and Sons demonstrated antitrust injury; the district court acted within its discretion by excluding certain evidence from the antitrust trial and by ordering JELD-WEN to unwind the merger, rejecting JELD-WEN's laches defense in the process; the district court properly found that equitable relief under the Clayton Act was appropriate because the merger created a significant threat that Steves and Sons will go out of business in 2021; and JELD-WEN has not shown that the district court's jury instructions in the trade-secrets trial were improper.However, the court vacated the jury's award of future lost profits to Steves and Sons in the antitrust trial because the issue is not ripe. The court explained that the injury on which the future lost profits award was premised cannot occur until September 2021, and the Clayton Act requires a plaintiff seeking damages—as opposed to equitable relief—to "show actual injury." The court also vacated the district court's entry of judgment for the intervenors in the trade-secrets case because JELD-WEN brought no claims against them. View "Steves and Sons, Inc. v. JELD-WEN, Inc." on Justia Law

Bayer filed suit against Belmora, alleging that Belmora engaged in unfair competition in violation of section 43(a) of the Lanham Act. The district court held that Bayer's section 43(a) claims were time-barred. In this case, because the Lanham Act does not include a limitations period for section 43(a) claims, the district court borrowed the statute of limitations from the most analogous state law, declining to apply the equitable doctrine of laches to those claims.The Fourth Circuit vacated the district court's judgment, concluding that the equitable doctrine of laches, rather than a statute of limitations, is the appropriate defense to Bayer's section 43(a) claims. The court also concluded that the district court failed to consider whether Bayer's related state-law claims were subject to tolling. The court remanded to the district court to determine in the first instance whether Bayer's section 43(a) claims are barred by laches and whether Bayer's related state-law claims are subject to tolling. The court affirmed the district court's judgment in all other respects. View "Belmora LLC v. Bayer Consumer Care AG" on Justia Law

Defendant was a successful franchise operator of several tax preparation businesses under the umbrella of JTH Tax, Inc. and SiempreTax+ LLC (together, "Liberty Tax"). In this case, Liberty Tax requested that defendant assign it the leases for the franchise properties, as provided for by the Purchase and Sale Agreement (PSA). However, the parties could not agree to terms for the assignment. Liberty Tax subsequently filed suit and defendant countersued. Defendant largely prevailed and was awarded a significant sum of damages. The Fourth Circuit vacated a substantial portion of the damages award but upheld the judgment in defendant's favor. On remand, the district court recalculated damages based on the Fourth Circuit's instructions and then, on defendant's motion, subsequently amended the judgment, increasing the damages based on purportedly new evidence. Both parties appealed again.The Fourth Circuit found no error in the district court's denial of defendant's arguments for reinstatement of much of the original damages. The court explained that the district court did not err in concluding that the Rule 59(e) standard and the mandate rule precluded defendant's disgorgement theory. However, the court found error in the district court's conclusion that defendant met the standard for relief based on newly discovered evidence and in the award of nominal damages. The court concluded that, in the declaration and now on appeal, defendant does not show he exercised reasonable due diligence during the three years of litigation to discover and present evidence of unpaid rent on the Burnside property. Furthermore, nominal damages were unavailable because defendant was awarded compensatory damages to remedy Liberty Tax's breach of contract, regardless of the finding that Liberty Tax also breached the contract by breaching the implied covenant. Accordingly, the court affirmed in part, reversed and vacated in part, and remanded with instructions to recalculae damages. View "JTH Tax, Inc. v. Aime" on Justia Law