Justia U.S. 8th Circuit Court of Appeals Opinion Summaries

Petters purported to purchase and resell electronics. His operations were a Ponzi scheme. In 2005, Petters purchased Polaroid and become Chairman of Polaroid’s board of directors. Polaroid continued to engage in legitimate business. Petters took several million dollars from Polaroid. In 2007-2008, Petters’s companies, including Polaroid, experienced major financial difficulty. Ritchie made short term loans of more than $150 million, with annual interest rates of 80 to 362.1%. Polaroid was not a signatory, although some proceeds were used to repay a Polaroid debt. When the loans were past due, Ritchie demanded collateral. Petters executed a Trademark Security Agreement (TSA) giving Ritchie liens on Polaroid trademarks. Polaroid’s CEO objected to the TSA as impeding Polaroid’s ability to raise needed capital. The TSA did allow Polaroid to grant first-priority trademark liens to secure $75 million in working capital. After the FBI raid, which resulted in Petters’s convictions for mail fraud, wire fraud, and money laundering, and sentence of 50 years in prison, Ritchie accelerated all of the loans. Polaroid filed for bankruptcy and challenged the TSA as an actual fraudulent transfer under federal and Minnesota bankruptcy law, citing the “Ponzi scheme presumption.” The bankruptcy court presumed Petters executed the liens with fraudulent intent, found Ritchie had not received them in good faith and for value, and granted summary judgment. The district court upheld the admission of expert testimony and application of the Ponzi scheme presumption. The Eighth Circuit affirmed. View "Ritchie Capital Mgmt., LLC v. Stoebner" on Justia Law

Plaintiff, president and owner of WestCorp, sued the government for a refund of an IRS tax penalty that he paid. At issue was the treatment of admittedly incomplete payments WestCorp made from 2000-2001. To maximize its recovery, the IRS applied those payments first toward WestCorp's non-trust fund taxes rather than dividing the payments proportionally between WestCorp's trust fund and non-trust fund taxes. The court agreed with the district court that the undisputed facts show, as a matter of law, that plaintiff willfully failed to pay the trust fund taxes at issue; the court also agreed with the district court that the IRS properly allocated the undesignated payments at issue; and the court rejected plaintiff's contention that the IRS should nonetheless have applied at least part of the undesignated payments toward WestCorp's trust fund obligations. Accordingly, the court affirmed the judgment. View "Westerman v. United States" on Justia Law

Continental sold its food and beverage metal can and can-end technology to Crown via a stock purchase agreement (SPA) in March 1990. The parties disputed the extent of each other's resultant liabilities, as defined by the indemnity provision in the SPA in concurrent binding arbitration and judicial proceedings. Continental subsequently appealed the grant of summary judgment and the district court's denial of its motion to reconsider or alter or amend its judgment. The court found that Continental failed to meet its burden of proving it was not afforded a full and fair opportunity to litigate the meaning of the indemnity provision. Therefore, the district court correctly determined that Continental was precluded from further litigating the provision's meaning, properly granted summary judgment in favor of Crown, and did not abuse its discretion in denying Continental's motion to reconsider.

Polysilicon producer MEMC entered in exclusive sales representation agreements with Semi-Materials. Under these agreements, Semi-Materials was to serve as the sales representative for MEMC in China and Korea. Semi-Materials brought suit against MEMC, claiming it was entitled to certain commissions. The court held that, considering the four corners of the agreements at issue, the court could not agree with the district court's conclusion that the agreements clearly and unambiguously limited Semi-Materials to receiving commissions only on those sales which included terms whereby the risk of loss remained with MEMC until the product entered China or South Korea. Because the meaning and intent of that language was uncertain and subject to more than one reasonable interpretation, it was necessary to reverse the grant of partial summary judgment and remand this matter to the district court for trial. The court also held that the evidence presented to the jury at trial supported its finding that MEMC clothed a sales manager with the authority to enter into the agreements with Semi-Materials. Accordingly, MEMC could not show there were no probative facts presented at trial supporting the jury's determination that Semi-Materials reasonably relied upon the sales manager's apparent authority to enter into the agreements. Moreover, the court rejected MEMC's argument that Semi-Materials failed to perform a material obligation to the contracts to provide regular reports to MEMC. Therefore, the court reversed the district court's grant of partial summary judgment for MEMC and affirmed its denial of MEMC's judgment as a matter of law.

This case involved a fallout of a $3.65 billion Ponzi scheme perpetrated by Minnesota businessman Thomas J. Petters. Appellants, investment funds (collectively, Ritchie), incurred substantial losses as a result of participating in Petters' investment scheme. Ritchie subsequently sued two officers of Petters' companies, alleging that they assisted Petters in getting Ritchie to loan over $100 million to Petters' company. Ritchie's five-count complaint alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(a), (c)-(d), common law fraud, and tortious inference with the contract. The court held that the district court erred in concluding that Ritchie's action was barred by a Receivership Order. The court also rejected arguments challenging the sufficiency of Ritchie's pleadings in the common law fraud count and did not to address other arguments related to abstention, lack of causation, and absolute privilege. Accordingly, the court reversed the judgment of the district court and remanded for further proceedings.

This case concerned the bankruptcy estate of Qualia Clinical Service, Inc. The estate's Chapter 7 Trustee sought to avoid as a preferential transfer a security interest recorded by one of Qualia's creditors shortly before the bankruptcy petition. The bankruptcy court and the Bankruptcy Appellate Panel (BAP) held the security interest voidable. The court held that the bankruptcy court and the BAP properly applied 11 U.S.C. 547(c)(5)(A) to conclude that the preferential transfer in this case, though it concerned an interest in accounts receivable, improved Inova Capital Funding, LLC's position as against Qualia's other creditors and so was not exempt from avoidance under that subsection. The court found Inova's remaining arguments unpersuasive.

Plaintiff appealed the district court's grant of summary judgment to defendant on his claim of malicious prosecution under Arkansas law. The district court held that plaintiff failed to present evidence sufficient to withstand summary judgment on two of the five elements necessary to sustain his claim. The court held that the district court erred in holding that the evidence was insufficient as a matter of law to sustain plaintiff's claim that defendant brought suit against him on the guaranty without probable cause. The court also held that a jury must decide what was defendant's motive or purpose in suing plaintiff if it in fact understood it had no reasonable chance of prevailing on the merits of its claim against plaintiff.

Appellant appealed the bankruptcy court's approval of a multi-million dollar, global settlement in one of the largest Ponzi scheme bankruptcies in American history. The settlement had been substantially consummated and the appeal had been rendered largely moot. The court held that the bankruptcy court did not abuse its discretion in approving the settlement where the record upon which the bankruptcy court based its approval of the settlement was sufficient and where the settlement satisfied the Flight Transportation/Drexel factors. Accordingly, the order of the bankruptcy court approving the settlement was affirmed.

FICO brought suit against three credit bureaus: Experian, Equifax, and Trans Union, as well as against VantageScore, the credit bureaus' joint venture. The suit alleged antitrust, trademark infringement, false-advertising, and other claims. FICO, Experian, and VantageScore appealed from the district court's judgment. The court held that FICO failed to demonstrate that it had suffered any antitrust injury that would entitle it to seek damages under section 4 of the Clayton Act, 15 U.S.C. 12-27, and FICO failed to demonstrate the threat of an immediate injury that might support injunctive relief under section 16. The court also held that there was no genuine issue of material fact that consumers in this market immediately understood "300-850" to describe the qualities and characteristics of FICO's credit score and therefore, the district court did not err in finding the mark to be merely descriptive. The court further held that there was sufficient evidence for a reasonable jury to determine that the U.S. Patent and Trademark Office (PTO) relied on FICO's false representation in deciding whether to issue the "300-850" trademark registration. The court agreed with the district court that VantageScore was not a licensee and therefore was not estopped from challenging the mark under either theory of agency or equity. The court finally held that FICO's false advertising claims were properly dismissed and the district court did not abuse its discretion in denying the motion for attorneys' fees.

Appellant, a Delaware corporation with its principal place of business in St. Louis, Missouri, sued appellee, a Spanish corporation with its principal place of business in Barcelona, Spain, for breach of contract and misappropriation of trade secrets in the United States District Court for the Eastern District of Missouri. At issue was whether the district court properly granted appellee's motion to dismiss for lack of personal jurisdiction, declined to reach the forum-non-conveniens argument, and denied the motion for failure to state a claim. The court held that the proper application of the five-factor test set forth in Johnson v. Arden supported hearing the present case in Missouri. Therefore, the court reversed the district court's decision to dismiss the complaint for lack of personal jurisdiction and remanded for further proceedings. As a preliminary matter, the court held that it would address the forum-non-conveniens argument because no additional facts were needed to resolve the issue. The court held, however, that because the plaintiff's choice of forum was entitled to significant deference and because the public-interest factors favor deciding the case in Missouri, the court did not find that the present case presented the exceptional circumstances necessary to invoke the doctrine of forum-non-conveniens. Therefore, the court denied appellee's motion to dismiss based on this ground. The court further held that in denying appellee's motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the district court did so without analysis and without prejudice. Therefore, the issue should be left for the district court to consider on remand.