An employee of a wine-making company was sued by his former employer for starting a competing business while he was still serving as the company’s president. The company also alleged that he misused his position as president to sell the same wine under the company’s brand and the brand of his new company, while assigning lower prices to the wine from his new brand, thereby siphoning sales away from the winemaker. After a trial, a jury found in favor of the company but awarded it no damages. The company appealed, arguing that the jury’s verdict was inconsistent with its findings regarding liability. The appellate panel disagreed, finding that the jury could reasonably have concluded that though the ex-employee was liable, his actions did not cause the company any significant financial harm. The panel upheld the verdict and the judgment of the district court.

Gerald Forsythe formed Indeck-Paso Robles, LLC for the purpose of creating and managing a wine-grape vineyard. In 2006, Indeck purchased Shimmin Canyon Vineyard in Paso Robles, California. Forsythe later established Continental Vineyard LLC, as a wholly-owned subsidiary of Indeck, for the purpose of operating Shimmin Canyon. Forsythe appointed himself chairman and CEO and named Randy Dzierzawski president. Dzierzawski was in charge of all of Continental’s day-to-day operations.

Though the two originally intended for Continental to only operate as a grape-growing enterprise, they eventually decided that they wished to branch out into winemaking. Continental then hired Chris Cameron, and experienced vintner, as Director of Winemaking. In 2010, Cameron and Dzierzawski, on behalf of Continental, met with Mark Esterman, a wine buyer for the Meijer grocery store chain to discuss developing custom wine for the store. Dzierzawski brought the opportunity to Forsythe, but Forsythe declined to pursue it, finding it to be a money loser. Continue reading ›

Envoy Medical is a medical device manufacturer based in Minnesota with technology that has the ability to restore hearing to the deaf. Unfortunately, the company’s prospects were allegedly cut short after Glen Taylor took over as CEO, which not only caused financial harm to the company but denied life-changing technology to the deaf.

As CEO of the medical-device company, Patrick Spearman guided the company to the early success it enjoyed, including getting FDA approval for the invention and marketing the company’s new device as a replacement for hearing aids. A video advertising the device that showed a mother getting emotional when she heard her voice for the first time after getting the implant went viral.

Another remarkable story of the potential of the device was of a Deputy Sheriff with profound hearing loss who, after receiving the implant, passed the hearing test that allows him to work the streets, while law enforcement officers with hearing aids are kept off the streets.

The medical invention was also featured on a variety of prominent television programs, including The Celebrity Apprentice, CNN, and the Ellen DeGeneres Show, among others. In 2011, Google gave the company an award for having created one of the top 11 inventions of the year.

In 2012, Taylor’s daughter was fired with cause by Spearman’s management team, at which point Taylor allegedly retaliated by having Spearman fired as CEO and taking his place in that role. Taylor allegedly then went on to fire all the key people who had the knowledge necessary to ensure the company’s financial success.

The billionaire business owner and majority shareholder of the Minnesota Timberwolves and the Minneapolis Star Tribune allegedly went on to use his money and influence to force control of the company out of the hands of its shareholders by using a series of loans and preferred share purchases to dilute their voting power. According to the lawsuit, the terms of those loans and purchases were allegedly not fully disclosed to the shareholders. Continue reading ›

LVMH Moët Hennessy-Louis Vuitton SE was scheduled to acquire Tiffany & Co. no later than August 24th, 2020, but the merger came to a halt when LVMH failed to even apply for antitrust clearance.

Antitrust laws exist to avoid monopolies. If two major companies merge to form one company, there’s a fear that the existence of a huge corporation, which now owns the market shares of both companies involved, might dominate the industry, thereby making it difficult, or even impossible for any other company to compete with them. Since healthy competition promotes innovation and helps drive down prices, it’s necessary for a healthy economy.

As a result, when two major corporations merge to form one company, they have to file for antitrust clearance with the authorities in the markets in which they operate, meaning the authorities look at the market share of the two companies and agree that the merger would not create a monopoly. But according to a recent lawsuit filed by Tiffany, LVMH has not only failed to acquire the antitrust clearance by the agreed-upon date but has failed to even file for antitrust clearance.

The terms of the merger allowed for an extension to November 24th, 2020 if antitrust clearance had not been obtained by August 24th, but the fact that LVMH still has yet to even file for antitrust clearance in two of the three relevant markets raises doubts about whether they’re taking this merger seriously. Tiffany has responded by filing a lawsuit in the Court of Chancery of the State of Delaware.

The lawsuit is asking the court to provide an order that LVMH must abide by the terms of the acquisition, which had been agreed upon by both companies.

Even before the lawsuit was filed the acquisition had been having problems. LVMH had claimed that Tiffany had suffered a Material Adverse Effect (MAE) as a result of the COVID-19 pandemic, and had tried to buy shares of Tiffany at a lower price per share than the price they had agreed upon in the terms of the contract. Continue reading ›

Apple’s app store is one of the most popular in the world, which means you need to play nice with Apple if you’re creating an app and you want to get in front of the millions of people who use Apple’s store to download apps. But Apple takes a percentage of every payment made to an app creator through their app store, which is why it retaliated after Epic Games introduced a new in-app payment system within their videogame, “Fortnite”. Apple removed the game from its app store as soon as it became aware of the update to the popular videogame.

Epic responded with a lawsuit that asked the court for an injunction against Apple that would require the tech giant to put the game back in its app store. It claimed Apple is acting as a monopoly with a payment system that allegedly suppresses competition and inflates prices.

Apple countersued with a claim that the videogame company had breached its contract with Apple by introducing an in-app payment system within the game that avoided the 30% cut every other app creator pays Apple and Google for placement in their app stores. Within hours of the addition of the in-app payment system, both tech giants had removed “Fortnite” from their app stores.

In its own complaint, Apple accused Epic, a multi-billion-dollar company, of trying to derive significant financial benefit from placing its videogame in Apple’s app store without sharing any of those profits with Apple.

Back in June, Tim Sweeney, Epic’s CEO, emailed executives of Apple, including the CEO, Tim Cook, asking for a special agreement that would exempt Epic from some of its contractual obligations, including the ones dealing with payments made in the app store. Apple rejected those terms, and in early August Epic sent to the app store an updated version of “Fortnite” that the company described as a “hotfix”, but Apple alleges it was more like a Trojan horse. The “hotfix” version of the videogame allegedly allowed it to bypass Apple’s normal review process and payment system, thereby allowing Epic to sneak into Apple’s app store a videogame that charged customers in the app, rather than in the app store.

Once the “Trojan horse” version of the videogame was in Apple’s app store, Sweeney sent another email to Apple saying that his company refused to abide by Apple’s payment processing rules, after which his company activated the in-app payment system, which Apple alleges was little more than theft.

Apple’s app store has about 1 billion global customers, and in just the first seven months of 2020, in-app purchases, premium apps, and subscriptions generated almost $39 billion in global revenue. Apple claims the fees it takes from app purchases help the company fund the development and maintenance of an app store that provides a safe and secure environment for customers to purchase and download third-party software.

For Epic’s part, the videogame company has earned more than $600 million by working with Apple. Continue reading ›

In a unanimous opinion, the U.S. Supreme Court recently ruled that allowing nonsignatories to an international arbitration agreement to compel arbitration through domestic equitable estoppel doctrines does not conflict with the signatory requirement of the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the New York Convention).

That case, GE Energy Power Conversion France SAS v Outokumpu Steamless USA, LLC, stems from a 2007 contract between a contractor and steel manufacturer for the construction of mills in the manufacturer’s steel plant. The plaintiff, an international subsidiary of the global power company, General Electric, had been subcontracted by the contractor to produce nine motors for the mills. Outokumpu Stainless USA, LLC (which acquired ownership of the plant), and its insurers sued GE Energy after the motors allegedly failed.

GE Energy moved to dismiss the case and sought to compel arbitration by enforcing the arbitration clauses in the contract between the contractor and steel manufacturer. A Federal District Court granted the motion to dismiss and compel arbitration. The Eleventh Circuit Court of Appeals reversed, holding that the New York Convention: (i) requires parties seeking to compel arbitration to be signatories of the arbitration agreement, and (ii) precludes the use of state-law doctrines of equitable estoppel to compel arbitration in conflict with the Convention’s signatory requirement. In reversing the Eleventh Circuit, the Supreme Court held that use of state law doctrines of equitable estoppel to compel arbitration by nonsignatories to an international arbitration agreement was not barred by or conflict with the New York Convention.

Before announcing its holding, the Court first analyzed the two primary authorities at issue in the case, the Federal Arbitration Act (“FAA”) and the New York Convention. The Court began it discussion by noting its previous holdings that the FAA permits a nonsignatory to rely on state-law equitable estoppel doctrines to enforce an arbitration agreement. Generally, in the arbitration context, the Court explained “equitable estoppel allows a nonsignatory to a written agreement containing an arbitration clause to compel arbitration where a signatory to the written agreement must rely on the terms of that agreement in asserting its claims against the nonsignatory.” Continue reading ›

After partners in a closely held corporation entered into years of adversarial litigation, a settlement agreement was reached. One of the partners later sued the other two, alleging that he was fraudulently induced into agreeing to the settlement when the defendant’s counsel misrepresented the financial position of the corporation at the time of the settlement. The circuit court dismissed the plaintiff’s complaint, finding that the defendants did not owe him a fiduciary duty during the litigation settlement discussions. The appellate court reversed, determining that because there was no document specifying that the parties’ relationship had been dissolved at the time of the settlement talks, the defendants still owed the plaintiff a fiduciary duty, and there was a question of material fact as to whether the resulting settlement agreement was valid. The appellate panel then reversed the decision of the circuit court.

Samuel Arndt, III, Nicholas Nardulli, and Diana Johnson were shareholders in Redhawk Financial Services, Inc. Arndt owned 49 percent of Redhawk’s shares; Nardulli was the controlling shareholder, a director, and the president of Redhawk; Johnson was a shareholder, a director, and the secretary of Redhawk. In December 2012, Redhawk filed a complaint against Arndt for breach of fiduciary duty. The complaint alleged that Arndt withdrew over $100,000 from Redhawk without an apparent business justification and also diverted Redhawk’s commissions into Arndt’s personal bank account. Arndt filed a counterclaim against Redhawk as well as a third-party complaint against Nardulli and Johnson, alleging breach of fiduciary duty and oppression of him as a minority shareholder. Continue reading ›

Delivery drivers for an online food delivery service sued the platform alleging violations of the Fair Labor Standard Act for failing to pay overtime. The delivery service sought to compel arbitration, which the drivers had agreed to in their employment agreements. The workers attempted to argue that they were engaged in foreign or interstate commerce and therefore were exempt from the Federal Arbitration Act, though the district court disagreed. The appellate panel found that the plaintiffs had completely ignored the governing framework and that being “engaged in commerce” and “involved in commerce” were two completely different concepts. The panel found that the § 1 exemption of the FAA was therefore narrowly tailored and that it was not unusual that the employment agreement failed to meet § 1’s more stringent requirement while still meeting the far broader requirements of § 2. The panel determined that the plaintiffs were not entitled to the exemption and it affirmed the decision of the district court

Grubhub is an online and mobile food-ordering and delivery marketplace. Grubhub provides a platform for diners to order takeout from local restaurants, either online or via its mobile app. When a diner places an order through Grubhub’s app, Grubhub transmits the order to the restaurant, which then prepares the diner’s meal. Once the food is ready, the diner can either pick it up themselves or request that Grubhub dispatch a driver to deliver it to her.

Grubhub considers its drivers to be independent contractors rather than employees. Several drivers who worked in cities including Chicago, Portland, and New York filed two suits against Grubhub, alleging violations of the Fair Labor Standards Act for failing to pay overtime. The suits hit a roadblock, however, as the drivers had signed agreements compelling arbitration. The workers attempted to argue that they were engaged in foreign or interstate commerce and therefore were exempt from the Federal Arbitration Act. The district courts disagreed and compelled arbitration. The plaintiffs then appealed, and the 7th Circuit consolidated the appeals. Continue reading ›

Musicians have been trying for years to control whether and which politicians may play their music at events. Many see their efforts as a natural reaction to a legitimate concern with having their art associated with someone whose views may not align with their own. As seen in a recently filed lawsuit by Neil Young against President Trump’s reelection campaign, musicians are trying out new strategies.

There is no love lost between Young and President Trump. The President has been using Young’s songs at rallies and events ever since he announced his campaign in 2015. This never sat well with Young who expressed his displeasure numerous times online and in interviews. Young’s posts were laced with frustration as he conceded that “legally he has the right to” but added, “however it goes against my wishes.” On election day in 2018, Neil Young posted a frustrated statement about President Trump and his continued use of Young’s music at events.

Young’s gripe with Trump’s use of his music is no recent phenomenon. Musicians and songwriters have balked when politicians play their songs at public events for decades. A famous example is Bruce Springsteen’s objection to Ronald Reagan’s campaign’s use of “Born in the U.S.A.” at campaign events in 1984. Numerous other artists have objected to political co-opting of their music over the intervening years.

Young’s recently filed lawsuit takes issue with President Trump’s use of “Rockin’ in the Free World” and another song, “Devil’s Sidewalk,” at the President’s rally in Tulsa, Oklahoma in June. In his suit, the musician accused the President’s campaign of copyright infringement for playing the songs without a license. The lawsuit seeks to enjoin the campaign from using the songs as well as an award of statutory damages. In his complaint, Young contends that he “in good conscience cannot allow his music to be used as a ‘theme song’ for a divisive, un-American campaign of ignorance and hate.” Continue reading ›

Many people have become wary of online forms asking for personal information since many of them prove to be opportunities for dishonest people and institutions to use and share that information for their own purposes. But there are institutions most of us assume to be trustworthy, and for most people, that would include the College Board, the same institution that develops and administers the SAT and ACT exams. According to a new lawsuit, the College Board allegedly collected and sold students’ personal information, including their names, addresses, gender, ethnicity, grades, and citizenship status.

According to a new lawsuit, which has been filed on behalf of the parent of a student of Chicago Public Schools, the College Board allegedly collected this information using a Student Search Survey. The College Board denies having done anything wrong, saying that the survey was optional and free for students to fill out. Legislators say the College Board did ask for students’ consent to distribute their information to colleges, universities, and scholarship providers, but did not mention that the information would be sold to those third parties – that the College Board was profiting off students’ personal information.

The lawsuit alleges that the College Board collected between 42¢ and 47¢ for each student name they sold to other organizations.

The lawsuit further alleges that, after obtaining students’ personal information, the College Board offered the students’ identifying information (including their names and addresses) for sale to third parties in order to promote Student Search Service, the survey they used to collect students’ information. Continue reading ›

ATTENTION BUSINESS OWNERS: we are investigating possible wrongful denials of business interruption insurance claims due to COVID-19. If you would like us to review your policy, feel free to send it along.

As we have written about previously, the COVID-19 pandemic and the numerous restrictions and shelter in place orders that have been implemented have spawned a number of lawsuits from business owners against insurance companies. These suits seek to determine coverage for business income losses that resulted from businesses being forced to shut down in compliance with government orders. A recent ruling from a federal judge in Kansas City could open the window for thousands of businesses whose insurers have denied their COVID-19-related claims.

Background of the COVID Coverage Disputes

Businesses holding all risk or business income interruption polices have submitted claims throughout the country to their insurers seeking coverage for business interruptions based on COVID-19-related closures. The claims generally seek recovery of lost business income and extra expenses incurred due to having to close their places of business as a result of the presence of the virus or government orders. The response from insurance companies has been almost universal: denial of the claims on the basis that the losses do not constitute a “direct physical loss or damage” at the covered property. Following the filing of hundreds of insurance coverage lawsuits, some plaintiffs are seeking consolidation of the federal lawsuits in multidistrict litigation. The Judicial Panel on Multidistrict Litigation heard an argument for consolidation in August and is expected to issue a decision in the coming weeks.

To date, most court decisions have sided with insurance companies. The courts in these cases have held that the risks posed by COVID-19 do not meet the direct physical loss or damage requirement for coverage under the insured’s respective policies. The recent opinion from U.S. District Court Judge Stephen Bough is definitely an outlier but gives new ammo for those businesses whose claims have not yet been decided or who have yet to file suit against their insurance companies. Continue reading ›

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