Justia U.S. 3rd Circuit Court of Appeals Opinion Summaries

TitleMax provides vehicle loans at interest rates as high as 180%. The entire process occurs at a TitleMax brick-and-mortar location. The borrower receives “a check drawn on a bank outside of Pennsylvania,” The borrower grants TitleMax a security interest in the vehicle. TitleMax records its lien with the appropriate state authority. Borrowers can make payments from their home states. TitleMax does not have any offices, employees, agents, or brick-and-mortar stores and is not licensed as a lender in Pennsylvania. TitleMax claims that it never solicited Pennsylvania business and does not run television ads within Pennsylvania.Pursuant to the Consumer Discount Company Act and the Loan Interest and Protection Law, Pennsylvania’s Department of Banking and Securities issued a subpoena requesting documents regarding TitleMax’s interactions with Pennsylvania residents. TitleMax then stopped making loans to Pennsylvania residents and asserts that it has lost revenue.The district court held that Younger abstention did not apply and that the Department’s subpoena’s effect was to apply Pennsylvania’s usury laws extraterritorially in violation of the Commerce Clause.The Third Circuit reversed. Applying the Pennsylvania statutes to TitleMax does not violate the extraterritoriality principle. TitleMax receives payments from within Pennsylvania and maintains an actionable security interest in vehicles located in Pennsylvania; its conduct is not “wholly outside” of Pennsylvania. The laws do not discriminate between in-staters and out-of-staters. Pennsylvania has a strong interest in prohibiting usury. Applying Pennsylvania’s usury laws to TitleMax’s loans furthers that interest and any resulting burden on interstate commerce is, at most, incidental. View "TitleMax of Delaware Inc v. Weissmann" on Justia Law

For 20 years, the vendor (SDM) provided food services at Drexel University in Philadelphia. In 2014 the university announced that it would competitively bid the contract for on-campus dining. The same vendor ultimately won that competition but about two years into the contract’s 10-year duration, the vendor sued the university for fraud, multiple breaches of contract, and alternatively for unjust enrichment. The university responded with fraud and breach-of-contract counterclaims. Only a few of the vendor’s breach-of-contract claims and portions of the university’s breach-of-contract claim survived summary judgment. The parties referred the remaining claims and counterclaims to arbitration and jointly moved to dismiss them. The district court granted that motion and entered final judgment, which the parties appealed, primarily to dispute the summary judgment ruling.The Third Circuit affirmed summary judgment in Drexel’s favor on SDM’s unjust enrichment and punitive damages claims, summary judgment in SDM’s favor on Drexel’s fraudulent inducement claim, and the district court’s decision to deny Drexel’s motion to strike declarations by SDM witnesses under the sham affidavit rule. The court vacated an order granting summary judgment to Drexel on SDM’s claims for fraudulent inducement, breach of contract for failure to renegotiate in good faith, and breach of a supplemental agreement for the Fall 2016 Semester. The surviving claims were remanded to the district court. View "SodexoMAGIC LLC v. Drexel University" on Justia Law

Vitamin Energy is the defendant in 5-hour Energy’s 2019 lawsuit under the Lanham Act for trademark infringement, false designation of origin, false advertising, and trademark dilution; 5-hour also made claims under Michigan law for trademark infringement, indirect trademark infringement, and unfair competition. Vitamin Energy was insured by Evanston. In a declaratory judgment action, the district court decided Evanston had no duty to defend. The Third Circuit vacated. Pennsylvania law imposes on insurers a broad duty to defend lawsuits brought against those they insure. An insured’s burden to establish its insurer’s duty to defend is light, and Vitamin Energy has carried it. The policy excludes coverage for Advertising Injury, defined as an injury “arising out of oral or written publication of material that libels or slanders.” While some allegations of the complaint involve disparagement, others do not. An underlying complaint need only contain at least one allegation that falls within the scope of the policy’s coverage for the duty to defend to be triggered. The duty to defend is broader than the duty to indemnify. Similarly, exclusions for suits based on “Intellectual Property,” “Incorrect Description,” “Failure to Conform,” and “Knowing” actions do not defeat the duty to defend. View "Vitamin Energy LLC v. Evanston Insurance Co" on Justia Law

In 2019, Mallet learned that Bundy was its newest competitor in the sale of baking release agents, the lubricants that allow baked goods to readily separate from the containers in which they are made. Bundy was well-known for other commercial baking products when it launched a new subsidiary, Synova, to sell baking release agents. Synova hired two Mallet employees, both of whom had substantial access to Mallet’s proprietary information. That information from Mallet helped Synova rapidly develop, market, and sell release agents to Mallet’s customers.Mallet sued, asserting the misappropriation of its trade secrets. The district court issued a preliminary injunction. restraining Bundy, Synova, and those employees from competing with Mallet. The Third Circuit vacated and remanded for further consideration of what, if any, equitable relief is warranted and what sum Mallet should be required to post in a bond as “security … proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” A preliminary injunction predicated on trade secret misappropriation must adequately identify the allegedly misappropriated trade secrets. If the district court decides that preliminary injunctive relief is warranted, the injunction must be sufficiently specific in its terms and narrowly tailored in its scope. View "Mallet & Co., Inc. v. Lacayo" on Justia Law

Cohen entered into a work-for-hire agreement with SLP, a special purpose entity formed by TWC to make the film, Silver Linings Playbook. Cohen was to receive $250,000 in fixed initial compensation and contingent future compensation of roughly 5% of the movie’s net profits. The movie was released to critical acclaim in 2012. TWC purports to own all the rights pertaining to the movie, including the Cohen Agreement.In 2017, following a flood of sexual misconduct allegations against its co-founder, Harvey Weinstein, TWC filed for Chapter 11 bankruptcy. The bankruptcy court approved TWC’s Asset Purchase Agreement with Spyglass, 11 U.S.C. 363. Spyglass sought a declaratory judgment that the Cohen Agreement and had been sold to Spyglass. If the Cohen Agreement were an executory contract, assumed and assigned under section 365, Spyglass would be responsible for approximately $400,000 in previously unpaid contingent compensation. If Spyglass instead purchased the Cohen Agreement as a non-executory contract, Spyglass would be responsible only for obligations on a go-forward basis. Other writers, producers, and actors with similar works-made-for-hire contracts made similar arguments.The bankruptcy court granted Spyglass summary judgment. The district court and Third Circuit affirmed. Cohen’s remaining obligations under the Agreement are not material and the parties did not clearly avoid New York’s substantial performance rule; the Cohen Agreement is not an executory contract. View "The Weinstein Co. Holdings, LLC v. Spyglass Media Group, LLC." on Justia Law

In March 2018, following sexual misconduct allegations against TWC’s co-founder Harvey Weinstein, TWC sought bankruptcy protection. TWC and Spyglass signed the Asset Purchase Agreement (APA). The sale closed in July 2018. Spyglass paid $287 million. Spyglass agreed to assume all liabilities associated with the Purchased Assets, including some “Contracts.” The APA identifies “Assumed Contracts,” as those Contracts that Spyglass would designate in writing, by November 2018.In May 2018, TWC filed an Assumed Contracts Schedule, with a disclaimer that the inclusion of a contract did not constitute an admission that such contract is executory or unexpired. A June 2018 Contract Notice, listed eight Investment Agreements as “non-executory contracts that are being removed from the Assumed Contracts Schedule.” The Investment Agreements, between TWC and Investors, had provided funding for TWC films in exchange for shares of future profits. Spyglass’s November 2018 Contract Notice listed nine Investment Agreements as “Excluded Contracts,”In January 2019, the Investors requested payments from Spyglass--their asserted share of a film’s profits. The Bankruptcy Court rejected the Investors’ claim that Spyglass bought all the Investment Agreements under the APA. The district court and Third Circuit affirmed. The Investment Agreements are not “Purchased Assets” and the associated obligations are not “Assumed Liabilities.” The Investment Agreements are not executory contracts under the Bankruptcy Code. View "The Weinstein Co. Holdings, LLC v. Y Movie, LLC" on Justia Law

The Appellants, with a $594,000 Small Business Administration loan, bought a Harrisburg, Pennsylvania property that became a pub. They executed a note, mortgage, and unconditional guarantees, providing that federal law would control the enforcement of the note and guarantees and that they could not invoke any state or local law to deny their obligations. The Appellants defaulted on the loan and sold the property. The SBA allowed the sale to proceed but declined to release the Appellants from their loan obligations, which were assigned to CBE for collection. The Appellants sued, citing the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692, the Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681, and the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL). CBE sought sanctions under Federal Rules 11 and 37, arguing that the Appellants brought frivolous claims and disobeyed discovery orders. The Appellants filed an untimely brief opposing sanctions and summary judgment, which did not include the separate responsive statement of material facts required by Local Rule. The district court granted summary judgment and denied the sanctions motions, reasoning that neither FDCPA not UTPCPL applies to commercial debts and the Appellants identified no material facts supporting their other claims. The Third Circuit affirmed and granted CBE FRAP 38 damages. The Appellants filed a brief that was essentially a copy of the one filed in the district court. The substance of their appeal “is as frivolous as its form.” View "Conboy v. United States Small Business Administration" on Justia Law

Dansko conducted due diligence to replace the trustee for its employee stock ownership plan. Benefit falsely denied having been recently been investigated by the Department of Labor. Dansko’s board passed a resolution appointing Benefit as the new trustee under the Trust Agreement. Around that time, Dansko decided to refinance its debt. Benefit never agreed in writing to help with the refinance but allegedly said it would “be able to do the [deal]” and estimated that it would need a month or more to do due diligence for the trust. Dansko thought Benefit would be the trustee for the deal. In December 2014, Benefit told Dansko that it would not serve as trustee for the debt deal, which delayed the deal and allegedly cost Dansko more than $2 million in extra interest.Dansko sued Benefit, alleging breach of the trust agreement, breach of an implied promise (promissory estoppel), and that Benefit fraudulently induced Dansko to hire it by falsely denying the DOL investigation. Benefit counterclaimed for its defense costs under an indemnification clause in the trust agreement. The district court rejected Dansko’s claims but held that Dansko did not have to indemnify Benefit for its defense costs. Applying Pennsylvania law, the Third Circuit vacated. The court erred in rejecting Dansko’s contract, estoppel, and fraud claims but under the trust agreement, Dansko must advance the trustee’s reasonable litigation expenses. View "Dansko Holdings Inc. v. Benefit Trust Co." on Justia Law

Ezaki, a Japanese confectionery company, makes and sells “Pocky,” thin, stick-shaped cookies that are partly coated with chocolate or flavored cream. The end of each is left partly uncoated to serve as a handle. In 1978, Ezaki started selling Pocky in the U.S. and began registering U.S. trademarks and patents. It has two Pocky product configurations registered as trade dresses and has a patent for a “Stick Shaped Snack and Method for Producing the Same.” In 1983, the Lotte confectionery company started making Pepero stick-shaped cookies partly coated in chocolate or flavored cream. Pepero “looks remarkably like Pocky.”In 1993-1995, Ezaki sent letters, notifying Lotte of its registered trade dress and asking it to cease and desist. Ezaki took no further action until 2015, when it sued, alleging trademark infringement and unfair competition, under the Lanham Act, 15 U.S.C. 1114, 1125(a)(1)(A). Under New Jersey law, it alleged trademark infringement and unfair competition. The Third Circuit affirmed summary judgment in favor of Lotte, holding that because Pocky’s product configuration is functional, it is not protected as trade dress. Trade dress is limited to features that identify a product’s source. Patent law protects useful inventions, but trademark law does not. View "Ezaki Gliko Kabushiki Kaisha v. Lotte International America Corp." on Justia Law

Two doctors and a former pharmaceutical sales representative formed a partnership, JKJ, to sue several pharmaceutical companies as a qui tam relator under the False Claims Act with respect to the marketing of the anti-clotting drug, Plavix. When one of them left the partnership and was replaced, that change amounted to forming a new partnership. The defendant’s moved to dismiss because the Act’s first-to-file bar stops a new “person” from “interven[ing] or bring[ing] a related action based on the [same] facts,” 31 U.S.C. 3730(b)(5).The Third Circuit vacated the dismissal, after noting responses by the Delaware Supreme Court to certified questions indicating that the two partnerships were distinct. The verb “intervene” means to inject oneself between two existing parties, as under Federal Rule of Civil Procedure 24. The new partnership did not do that but instead came in as the relator. The district court ruling was based mainly on a dictum from a Supreme Court case on a very different issue and never considered the issue here. The Act’s plain text bars only intervention or bringing a related suit. View "In Re: Plavix Marketing, Sales Practices and Products Liability Litigation" on Justia Law