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

The case involved two related companies and three individuals who operated a business targeting immigrants detained by U.S. Immigration and Customs Enforcement (ICE) and eligible for release on immigration bonds. The companies marketed their services as an affordable way to secure release, but in reality, they charged high fees for services that were often misrepresented or not provided. The agreements were complex, mostly in English, and required significant upfront and recurring payments. Most consumers did not understand the terms and relied on the companies’ oral representations, which were deceptive. The business was not licensed as a bail bond agent or surety, and the defendants’ practices violated federal and state consumer protection laws.After the plaintiffs—the Consumer Financial Protection Bureau, Massachusetts, New York, and Virginia—filed suit in the United States District Court for the Western District of Virginia, the defendants repeatedly failed to comply with discovery obligations and court orders. They did not produce required documents, ignored deadlines, and failed to appear at hearings. The district court, after multiple warnings and opportunities to comply, imposed default judgment as a sanction for this misconduct. The court also excluded the defendants’ late-disclosed witnesses and exhibits from the remedies hearing, finding the nondisclosures unjustified and prejudicial.The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court’s decisions. The Fourth Circuit held that the default judgment was an appropriate sanction for the defendants’ repeated and willful noncompliance. The exclusion of evidence and witnesses was also upheld, as was the issuance of a permanent injunction and the calculation of monetary relief, including restitution and civil penalties totaling approximately $366.5 million. The court found no abuse of discretion or legal error in the district court’s rulings and affirmed the final judgment in all respects. View "Consumer Financial Protection Bureau v. Nexus Services, Inc." on Justia Law

Two former employees of a large technology company, along with a real estate developer and related individuals and entities, were alleged to have engaged in a kickback scheme involving real estate transactions in Northern Virginia. The employees, responsible for managing real estate deals for the company, allegedly steered contracts to the developer’s firm in exchange for secret payments funneled through a network of trusts and entities. The scheme purportedly inflated the company’s costs for both leasing and purchasing properties, with millions of dollars in kickbacks distributed among the participants. The company discovered the scheme after a whistleblower report, conducted an internal investigation, and reported the matter to federal authorities.The United States District Court for the Eastern District of Virginia granted summary judgment in favor of the defendants on several claims, including those under the Racketeer Influenced and Corrupt Organizations (RICO) Act, fraud, unjust enrichment, and conversion, and partially on a civil conspiracy claim. The district court found that the company failed to establish the existence of a RICO enterprise, did not show injury to its business or property, and that equitable claims were precluded by the availability of legal remedies or the existence of contracts. The court also ruled that an attorney defendant could not be liable for conspiracy with his clients.The United States Court of Appeals for the Fourth Circuit reversed the district court’s summary judgment. The appellate court held that genuine disputes of material fact existed regarding the existence of a RICO enterprise, whether the company suffered financial harm, and the viability of the fraud, unjust enrichment, conversion, and civil conspiracy claims. The court clarified that the company was entitled to pursue legal and equitable remedies in the alternative and that the attorney’s potential liability for conspiracy could not be resolved on summary judgment. The case was remanded for further proceedings. View "Amazon.com, Inc. v. WDC Holdings LLC" on Justia Law

Several individuals and an LLC, who own oil and gas interests in West Virginia, leased their mineral rights to EQT, a group of related energy companies. The leases, numbering nearly 3,843, required EQT to pay royalties to the lessors. During the period from January 1, 2012, to February 28, 2021, EQT extracted “wet gas” from the wells, which contains valuable natural gas liquids (NGLs) like propane and butane. EQT sold the wet gas at the wellhead to its own affiliates and paid royalties to the lessors based on the energy content (BTU) of the wet gas, not on the value of the NGLs. EQT then separated and sold the NGLs to third parties but did not pay additional royalties for these sales. In 2021, EQT notified lessors it would begin calculating royalties based on the separate value of NGLs and residue gas.The plaintiffs filed a putative class action in the United States District Court for the Northern District of West Virginia, alleging breach of contract and fraudulent concealment, and sought class certification. The district court granted partial summary judgment, finding EQT’s affiliates were its alter egos, and certified classes for both claims, later dividing the class into three subclasses based on lease language. EQT petitioned for interlocutory appeal of the class certification order.The United States Court of Appeals for the Fourth Circuit reviewed the district court’s certification order. The Fourth Circuit affirmed the certification of the breach of contract claim, holding that the class was ascertainable and that common questions of law and fact predominated, given EQT’s uniform royalty payment method and the immateriality of lease language variations under West Virginia law. However, the Fourth Circuit reversed the certification of the fraudulent concealment claim, holding that individual questions of reliance would predominate, making class treatment inappropriate for that claim. Thus, the district court’s order was affirmed in part and reversed in part. View "Glover v. EQT Corporation" on Justia Law

Residents and businesses in Lumberton, North Carolina, experienced severe flooding during Hurricanes Matthew and Florence in 2016 and 2018. The flooding was exacerbated by a gap in the city’s levee system, which existed because a CSX Transportation rail line crossed the area. The City of Lumberton had previously entered into a licensing agreement, known as the Tri-Party Agreement (TPA), with CSX’s predecessor and a local drainage district. The TPA allowed the City to construct and maintain an earthen dike across CSX’s property and, under certain conditions, to close the dike in the event of imminent flooding. However, the City never built the dike. When the hurricanes approached, the City sought permission from CSX to close the gap with emergency sandbags, but CSX refused, resulting in significant flood damage.The plaintiffs, representing a putative class of affected residents and businesses, brought suit in the United States District Court for the Eastern District of North Carolina, asserting contract and tort claims against CSX. The district court dismissed the tort claims as preempted by federal law and initially dismissed the contract claim, finding the plaintiffs were not intended third-party beneficiaries of the TPA. On appeal, the United States Court of Appeals for the Fourth Circuit reversed the dismissal of the contract claim, allowing it to proceed. After discovery, the district court granted summary judgment to CSX on three alternative grounds: federal preemption, lack of third-party beneficiary status, and failure to show breach of contract.On appeal, the United States Court of Appeals for the Fourth Circuit reviewed the grant of summary judgment de novo. The court affirmed the district court’s judgment on the ground that the plaintiffs could not show CSX breached the TPA. The court held that, because the earthen dike contemplated by the TPA was never constructed, CSX had no contractual obligation to allow closure of the gap by other means, such as sandbags. The judgment was affirmed. View "Edwards v. CSX Transportation, Inc." 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

Cory Fitzgerald Sanders, through his company SandTech, LLC, contracted with the federal government to supply teleconference equipment and support services. Sanders won contracts by bidding on the online platform "FedBid" and affirming that he would supply the requested equipment or services according to the contract terms. However, Sanders failed to fulfill these obligations, providing used equipment instead of new, misrepresenting his company's certifications, and using falsified documents to claim higher certification levels. After several contracts were terminated, Sanders formed a new company, CyCorp Technologies, LLC, to continue bidding on federal contracts, again using fraudulent means to secure contracts and conceal the true nature of the equipment provided.The United States District Court for the District of Maryland convicted Sanders of wire fraud, submitting false claims, and submitting a false document. Sanders was sentenced to 45 months in prison. He appealed, arguing that a jury instruction misstated the law and that the district court erred in applying a sentencing enhancement for using "sophisticated means" to carry out his fraud.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court found no error in the jury instructions when considered as a whole, determining that they adequately informed the jury of the required intent and did not mislead or confuse them. The court also upheld the district court's application of the sophisticated means enhancement, noting that Sanders' conduct involved especially complex or intricate offense conduct, including the use of multiple business names, falsified certifications, and blind-shipping to conceal the source of equipment. The Fourth Circuit affirmed both Sanders' convictions and his sentence. View "United States v. Sanders" on Justia Law

CPI Security Systems, Inc. filed a lawsuit against Vivint Smart Home, Inc., alleging that Vivint engaged in deceptive practices to lure away CPI’s customers. Vivint sales representatives falsely claimed that Vivint had acquired CPI, that CPI was going out of business, or that Vivint needed to upgrade CPI’s equipment. These tactics led many CPI customers to switch to Vivint, causing significant losses for CPI. A jury found Vivint liable for violating the Lanham Act, the North Carolina Unfair and Deceptive Trade Practices Act (UDTPA), and for committing the common-law torts of unfair competition and tortious interference with contracts. The jury awarded CPI $49.7 million in compensatory damages and $140 million in punitive damages.The United States District Court for the Western District of North Carolina upheld the jury’s verdict. Vivint appealed, raising several issues, including the requirement of CPI’s reliance on false statements for the UDTPA claim, the sufficiency of evidence supporting the damages award, the application of North Carolina’s cap on punitive damages, and the admission of prejudicial evidence.The United States Court of Appeals for the Fourth Circuit reviewed the case and found no reversible error. The court held that CPI was not required to prove its own reliance on Vivint’s false statements to establish a UDTPA claim, as the claim was based on unfair competition rather than fraud. The court also found that the evidence presented by CPI was sufficient to support the jury’s damages award. Additionally, the court ruled that the district court correctly applied North Carolina’s cap on punitive damages by considering the total compensatory damages awarded. The court further held that the district court did not abuse its discretion in denying Vivint’s motion to bifurcate the trial or in its evidentiary rulings. The reassignment of the trial judge post-trial did not warrant a new trial. Consequently, the Fourth Circuit affirmed the district court’s judgment. View "CPI Security Systems, Inc. v. Vivint Smart Home, Inc." on Justia Law

Employers’ Innovative Network and its president, Jeff Mullins, entered into contracts with Bridgeport Benefits, Capital Security, and other parties to secure a new health insurance policy for their employee healthcare benefit plan. The relationship between the parties deteriorated, leading Employers’ Innovative Network to file a lawsuit in West Virginia state court in April 2018, alleging breach of contract, fraud, slander, and violations of the West Virginia Unauthorized Insurers Act. The case was removed to federal court but was stayed pending arbitration in Bermuda, as stipulated in the contracts.The arbitration was conducted in Bermuda, where the arbitrator, Delroy Duncan, ruled in favor of the defendants. Employers’ Innovative Network later challenged Duncan’s impartiality, citing conflicts of interest, but the Bermuda Arbitration Institute upheld Duncan’s position. The plaintiffs did not appeal this decision to the Bermuda Supreme Court. Subsequently, the defendants sought to enforce the arbitral award in the United States under Chapter 2 of the Federal Arbitration Act (FAA), and the Southern District of West Virginia granted their request, rejecting the plaintiffs’ public policy defense.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court vacated the district court’s decision and remanded the case for further fact-finding to determine whether Chapter 1 or Chapter 2 of the FAA applies. The appellate court noted that the arbitration might be governed by Chapter 1, which includes an “evident partiality” defense, or by Chapter 2, which does not explicitly include such a defense but allows for non-enforcement on public policy grounds. The court emphasized the need to clarify the citizenship of Capital Security and the nature of the parties’ relationship to determine the applicable chapter. View "Employers' Innovative Network, LLC v. Bridgeport Benefits, Inc." on Justia Law

Brainchild Surgical Devices, LLC, a medical device developer, entered into a contract with CPA Global Limited for patent renewal services. Brainchild alleged that CPA overcharged it by marking up fees beyond the actual costs and sued for breach of contract and fraud. The district court excluded Brainchild’s expert witnesses, granted summary judgment for CPA on the breach of contract claim, dismissed the fraud claim, and denied leave to amend the fraud claim.The United States District Court for the Eastern District of Virginia dismissed Brainchild’s fraud claim for lack of particularity and denied leave to amend. The court granted summary judgment for CPA on the breach of contract claim, finding that Brainchild’s theories were inconsistent with the contract’s terms. The court excluded Brainchild’s expert witnesses, David Cass and John Keogh, for offering legal conclusions and lacking qualifications.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court affirmed the district court’s exclusion of Cass’ testimony due to lack of qualification and improper legal conclusions. The court also affirmed the exclusion of Keogh’s testimony for failing to disclose the bases of his opinions and offering legal conclusions but reversed the decision to disqualify him based on confidential information. The court agreed with the district court that Brainchild’s pass-through cost and implied covenant of good faith theories failed to overcome summary judgment. However, the court reversed the summary judgment for CPA on the theory that CPA applied Country Charges unrelated to the required personnel, infrastructure, and third parties for renewals in particular jurisdictions. The case was remanded for further proceedings on this theory. The court also affirmed the denial of leave to amend the fraud claim. View "Brainchild Surgical Devices, LLC v. CPA Global Limited" on Justia Law

Following the September 11 attacks, Kellogg Brown & Root International (KBR) contracted with the U.S. Army to provide logistics support in Iraq and Kuwait. KBR subcontracted with First Kuwaiti General Trading & Contracting W.L.L. (First Kuwaiti) to provide trailers for troops. First Kuwaiti incurred significant unanticipated costs and sought additional payment from KBR. Disputes arose, leading to arbitration before the International Center for Dispute Resolution (ICDR). The ICDR Panel issued a final award denying First Kuwaiti’s claim for payment and resolving all disputes. First Kuwaiti’s request for changes to the award was rejected by the ICDR Panel.First Kuwaiti filed a motion in the U.S. District Court for the Eastern District of Virginia to vacate the arbitration award, which KBR opposed as untimely. KBR also filed a cross-motion to confirm the award. The district court denied First Kuwaiti’s motion to vacate as untimely and granted KBR’s motion to confirm the award. Additionally, the district court denied First Kuwaiti’s request for prejudgment interest on two other claims unrelated to the trailer damages.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court affirmed the district court’s decision, holding that First Kuwaiti’s motion to vacate was untimely as it was filed more than three months after the final arbitration award was delivered. The court also held that the district court had the authority to confirm the arbitration award under Chapter Two of the Federal Arbitration Act, which applies to arbitrations involving foreign parties and does not require consent for judicial confirmation. Lastly, the court found no abuse of discretion in the district court’s denial of prejudgment interest, as the stipulations did not explicitly provide for such interest and the circumstances did not warrant it. The Fourth Circuit affirmed the district court’s orders. View "First Kuwaiti General Trading & Contracting W.L.L. v. Kellogg Brown & Root International, Incorporated" on Justia Law