Latest 9 Cases This Week: Epic Systems Corp. v. Tata Consultancy Services Ltd. (7th Cir.), Smart Oil, LLC v. DW Mazel, LLC (7th Cir.), Farmers ...

Democracy Is on the Ballot: One Party Defends It, The Other Would Let It Die

AUSTIN SARAT

Austin Sarat—Associate Provost, Associate Dean of the Faculty, and William Nelson Cromwell Professor of Jurisprudence and Political Science at Amherst College—explains why the 2020 Democratic National Convention was unlike any other political gathering in American history for reasons beyond its virtual platform. Sarat argues that the future of American democracy lies in the balance, and when we vote in November, it will be up to us whether democracy lives or dies.

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Epic Systems Corp. v. Tata Consultancy Services Ltd.

Court: US Court of Appeals for the Seventh Circuit

Dockets: 19-1613, 19-1528

Opinion Date: August 20, 2020

Judge: KANNE

Areas of Law: Business Law, Civil Procedure, Intellectual Property, Internet Law

Without permission from Epic, TCS downloaded thousands of documents containing Epic’s confidential information and trade secrets. TCS used some of the information to create a “comparative analysis”—a spreadsheet comparing TCS’s health-record software (Med Mantra) to Epic’s software. TCS’s internal communications show that TCS used this spreadsheet in an attempt to enter the U.S. health-record-software market, steal Epic’s client, and address key gaps in TCS’s own Med Mantra software. Epic sued. A jury ruled in Epic’s favor on all claims, including multiple Wisconsin tort claims. The jury then awarded Epic $140 million in compensatory damages, for the benefit TCS received from using the comparative-analysis spreadsheet; $100 million for the benefit TCS received from using Epic’s other confidential information; and $700 million in punitive damages for TCS’s conduct. The district court upheld the $140 million compensatory award and vacated the $100 million award. It reduced the punitive damages award to $280 million, reflecting Wisconsin’s statutory punitive-damages cap. The Seventh Circuit remanded. There is sufficient evidence for the jury’s $140 million verdict based on TCS’s use of the comparative analysis, but not for the $100 million verdict for uses of “other information.” The jury could punish TCS by imposing punitive damages, but the $280 million punitive damages award is constitutionally excessive.

Smart Oil, LLC v. DW Mazel, LLC

Court: US Court of Appeals for the Seventh Circuit

Docket: 19-2542

Opinion Date: August 17, 2020

Judge: Brennan

Areas of Law: Business Law, Contracts

DWM agreed to purchase 30 gasoline station-convenience stores from Smart for $67 million. It was understood that it was a "flip" because Smart did not yet own the properties. Both parties were represented by counsel. The Agreement requires DWM to deposit $300,000 into an escrow account. At the close of the due diligence period, DWM is to pay a second deposit of $450,000. DWM never paid the initial earnest money deposit but the parties continued their due diligence investigations and negotiations. The Agreement requires DWM to provide Smart with written notice to terminate the Agreement if, after its investigations, DWM disapproved of the purchase. If DWM did not provide that written notice, the Agreement states that Smart is entitled to keep the earnest money if the deal falls through. DWM failed to provide notice of disapproval and did not pay the second deposit. In the meantime, Smart executed contracts to acquire the properties. When the DWM-Smart deal fell through, Smart sued DWM for breach of contract, arguing it was entitled to $750,000 in earnest money as liquidated damages. DWM counterclaimed for breach of contract and fraudulent inducement, for failure to provide adequate due diligence materials. The Seventh Circuit affirmed holdings that DWM breached the contract, that DWM’s obligation to pay the earnest money remained, and that Smart was entitled to the earnest money as liquidated damages under Illinois law.

Farmers Edge Inc. v. Farmobile, LLC

Court: US Court of Appeals for the Eighth Circuit

Docket: 18-2900

Opinion Date: August 17, 2020

Judge: Jane Louise Kelly

Areas of Law: Business Law, Contracts, Intellectual Property, Labor & Employment Law

FEI, Crop Venture's successor-in-interest, filed suit alleging that the individual defendants took proprietary information they developed at Crop Ventures after they left the company and co-founded Farmobile (the corporate defendant). Specifically, FEI alleges that the individual defendants' behavior constituted a breach of explicit or implicit contracts with the company; defendants were obligated to assign to their employer the ownership rights of products they worked to develop; the individual defendants breached their duty of loyalty to their employer; and the individual defendants misappropriated trade secrets. The district court denied in full FEI's motion, and granted in part and denied in part Farmobile's motion. The Eighth Circuit affirmed and held that because no contract bound the parties during Defendant Nuss' term of employment, Nuss was not in breach of an explicit contract; FEI has not shown that any of the individual defendants was similarly "specifically directed" during their product-development process, so no implied contracts were created under the hired-to-invent doctrine; FEI failed to show the individual defendants breached their duty of loyalty to their employer; FEI cannot maintain a trade secret claim under the Nebraska Trade Secrets Act (NTSA) or the federal Defend Trade Secrets Act (DTSA); and the remaining claims are unpersuasive.

MPAY Inc. v. Erie Custom Computer Applications, Inc.

Court: US Court of Appeals for the Eighth Circuit

Docket: 19-2206

Opinion Date: August 14, 2020

Judge: Raymond W. Gruender

Areas of Law: Business Law, Copyright, Intellectual Property

MPAY, a Massachusetts corporation that develops and owns payroll-processing software that it licenses to its customers, appealed the district court's denial of its motion for a preliminary injunction against appellees. MPAY claimed that it was entitled to such relief based on its copyright-infringement and trade-secrets-misappropriation claims. The Eighth Circuit affirmed in part and vacated in part, holding that appellees demonstrated that their copying, disclosure, and possession of the source code were authorized by the Software Development and License Agreement that MPAY signed with its business partner. Therefore, MPAY has not shown a likelihood of success on the merits of its copyright infringement or trade-secrets-misappropriation claims, and the district court did not err in so concluding. The court also held that MPAY's assertion, that the district court erroneously concluded MPAY's harms were compensable with money damages and so were not irreparable, lacked merit. Furthermore, the balance of the equities and the public interest do not favor an injunction. The court remanded for further proceedings on the question of whether the contractors wrongfully sublicensed use of the software.

Oracle America, Inc. v. Hewlett Packard Enterprise Co.

Court: US Court of Appeals for the Ninth Circuit

Docket: 19-15506

Opinion Date: August 20, 2020

Judge: Milan D. Smith

Areas of Law: Business Law, Copyright, Intellectual Property, Internet Law

Oracle, owner of the proprietary Solaris software operating system, filed suit alleging that HPE improperly accessed, downloaded, copied, and installed Solaris patches on servers not under an Oracle support contract. Oracle asserted direct copyright infringement claims for HPE's direct support customers, and indirect infringement claims for joint HPE-Terix customers. The district court granted summary judgment for HPE. The Ninth Circuit held that the copyright infringement claim is subject to the Copyright Act's three year statute of limitations, which runs separately for each violation. The panel explained that Oracle's constructive knowledge triggered the statute of limitations and Oracle failed to conduct a reasonable investigation into the suspected infringement. The panel also held that the intentional interference with prospective economic advantage claim is barred by California's two year statute of limitations. Therefore, the panel affirmed the district court's partial summary judgment for HPE on the infringement and intentional interference claims. The panel also affirmed in part summary judgment on the indirect infringement claims for patch installations by Terix; reversed summary judgment on all infringement claims for pre-installation conduct and on the direct infringement claims for unauthorized patch installations by HPE; and addressed all other issues in a concurrently filed memorandum opinion.

Compania De Inversiones v. Grupo Cementos de Chihuahua

Court: US Court of Appeals for the Tenth Circuit

Docket: 19-1151

Opinion Date: August 17, 2020

Judge: Mary Beck Briscoe

Areas of Law: Arbitration & Mediation, Business Law, Civil Procedure, Contracts, International Law

The parties to this appeal were a Bolivian company, Compania de Inversiones Mercantiles S.A. (“CIMSA”), and Mexican companies known as Grupo Cementos de Chihuahua, S.A.B. de C.V. and GCC Latinoamerica, S.A. de C.V. (collectively “GCC”). Plaintiff-appellant CIMSA brought a district court action pursuant to the Federal Arbitration Act to confirm a foreign arbitral award issued in Bolivia against Defendant-appellee GCC. The underlying dispute stemmed from an agreement under which CIMSA and GCC arranged to give each other a right of first refusal if either party decided to sell its shares in a Bolivian cement company known as Sociedad Boliviana de Cemento, S.A. (“SOBOCE”). GCC sold its SOBOCE shares to a third party after taking the position that CIMSA failed to properly exercise its right of first refusal. In 2011, CIMSA initiated an arbitration proceeding in Bolivia. The arbitration tribunal determined that GCC violated the contract and the parties’ expectations. GCC then initiated Bolivian and Mexican court actions to challenge the arbitration tribunal’s decisions. A Bolivian trial judge rejected GCC’s challenge to the arbitration tribunal’s decision on the merits. A Bolivian appellate court reversed and remanded. During the pendency of the remand proceedings, Bolivia’s highest court reversed the appellate court and affirmed the original trial judge. But as a result of the simultaneous remand proceedings, the high court also issued arguably contradictory orders suggesting the second trial judge’s ruling on the merits remained in effect. GCC filed a separate Bolivian court action challenging the arbitration tribunal’s damages award. That case made its way to Bolivia’s highest court too, which reversed an intermediate appellate court’s nullification of the award and remanded for further proceedings. Invoking the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, CIMSA filed a confirmation action in the United States District Court for the District of Colorado. After encountering difficulties with conventional service of process in Mexico under the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents, CIMSA sought and received permission from the district court to serve GCC through its American counsel pursuant to Federal Rule of Civil Procedure 4(f)(3). The district court then rejected GCC’s challenges to personal jurisdiction, holding (among other things) that: (1) it was appropriate to aggregate GCC’s contacts with the United States; (2) CIMSA’s injury arose out of GCC’s contacts; (3) exercising jurisdiction was consistent with fair play and substantial justice; and (4) alternative service was proper. The district court rejected GCC's defenses to CIMSA's claim under the New York Convention. Before the Tenth Circuit Court of Appeals, the Court affirmed the district court: the district court properly determined that CIMSA’s injury arose out of or related to GCC’s nationwide contacts. "The district court correctly decided that exercising personal jurisdiction over GCC comported with fair play and substantial justice because CIMSA established minimum contacts and GCC did not make a compelling case to the contrary." The Court also affirmed the district court's confirmation of the arbitration tribunal's decisions.

George Clift Enterprises, Inc. v. Oshkosh Feedyard Corp.

Court: Nebraska Supreme Court

Citation: 306 Neb. 775

Opinion Date: August 14, 2020

Judge: Freudenberg

Areas of Law: Business Law, Contracts, Personal Injury

The Supreme Court affirmed the order of the district court granting summary judgment against a real estate agency on its complaint against the seller and buyers of certain property for breach of an exclusive listing agreement and tortious interference with a contract, business relationship, or expectation, holding that summary judgment was properly granted. The sale of the property occurred after the listing period and after the protection period of the agreement, and no commission was paid. The negotiations for the sale were conducted directly between the seller and buyers, with the real estate agent's knowledge. The district court granted Defendants' motions for summary judgment. On appeal, the real estate agency argued that summary judgment was inappropriate because the district court held the summary judgment hearing before the real estate company had conducted depositions. The Supreme Court affirmed, holding (1) the district court did not prematurely address Defendants' motions for summary judgment; and (2) the district court erred in awarding attorney fees.

Global Textile Alliance, Inc. v. TDI Worldwide, LLC

Court: North Carolina Supreme Court

Docket: 279A19

Opinion Date: August 14, 2020

Judge: Paul M. Newby

Areas of Law: Business Law, Civil Procedure

The Supreme Court affirmed the decision of the Business Court in this action brought by Global Textile Alliance, Inc. (GTA) alleging that Defendants engaged in several improper acts during the formation and operation of Dolven Enterprises, Inc., holding that the Business Court did not abuse its discretion either by ordering production of the relevant communications or by conducting a limited review of those communications. When it was discovered that GTA had withheld confidential correspondence between GTA and its outside counsel and Haspeslagh conveying legal advice regarding the matters giving rise to the instant litigation Defendant filed a motion to compel GTA to produce the communications. Defendant argued that GTA waived the attorney-client privilege by including Stefaan Haspeslagh on communications with GTA's counsel. The Business Court granted the motion to compel. The Supreme Court affirmed, holding that the Business Court (1) did not abuse its discretion by determining that communications involving Haspeslagh were not privileged under the attorney-client privilege; (2) did not err in determining that communications involving Haspeslagh were not protected under the work-product doctrine; and (3) did not err by not conducting an exhaustive in camera review of all communications involving Haspeslagh.

Orlando Residence, Ltd. v. Alliance Hospitality Management, LLC

Court: North Carolina Supreme Court

Docket: 113A19

Opinion Date: August 14, 2020

Judge: Davis

Areas of Law: Business Law, Contracts

The Supreme Court modified and affirmed the decision of the Business Court dismissing Defendant's crossclaims against a co-defendant, holding that the Business Court correctly dismissed the crossclaims. This appeal arose from litigation between Kenneth Nelson, Alliance Hospitality Management, LLC, and Orlando Residence, Ltd. Orlando filed this lawsuit against Alliance and Nelson seeking recovery of funds that Alliance allegedly wrongfully transferred. Nelson, appearing pro se, filed a document in which he asserted eighteen crossclaims against Alliance seeking damages and various forms of equitable relief. The Business Court dismissed the claims asserted by Orlando and all of Nelson's crossclaims. Nelson appealed, arguing that the Business Court incorrectly ruled that a crossclaim asserted by one defendant against a co-defendant automatically ceases to be viable once the plaintiff's original claims against the defendants are dismissed. The Supreme Court agreed, holding (1) with the exception of certain crossclaims, the dismissal of the original action does not, by itself, mandate the dismissal of a crossclaim so long as the crossclaim meets the Rule 13(g) prerequisites for bringing such a claim; and (2) because res judicata barred Nelson's "qualifying claims," the dismissal of Nelson's remaining fifteen crossclaims was proper.