Justia U.S. 1st Circuit Court of Appeals Opinion Summaries

Kendell Seafood Imports, Inc. and Mark Foods, LLC are both fish importers. Kendell alleged that Mark Foods tortiously interfered with its agreement with Chilean Sea Bass, Inc. (CSB), a fish distributor. According to Kendell, it had arranged with CSB to purchase the distributor’s entire catch for several years, including 2021, and that CSB agreed to roll over an outstanding 2020 balance into the 2021 price. Kendell further claimed that Mark Foods was aware of this agreement and attempted to solicit business from CSB during the same period, thereby interfering with Kendell’s relationship and causing it harm.After Kendell initially sued Mark Foods for tortious interference in the United States District Court for the District of Rhode Island, Mark Foods moved to dismiss the complaint. In response, Kendell filed an amended complaint with similar facts but with additional details about the agreement with CSB. The district court treated the amended complaint as operative and, after considering substantive arguments from both parties, granted Mark Foods’ motion to dismiss with prejudice. The district court found that Kendell’s allegations did not plausibly support three essential elements of tortious interference: the defendant’s knowledge of the contract, intentional interference, and resulting damages.The United States Court of Appeals for the First Circuit reviewed the case on appeal. It held that the district court properly applied the pending motion to dismiss to the amended complaint, as the amendments did not affect the relevant arguments. Applying Rhode Island law, the First Circuit concluded that Kendell had not sufficiently pleaded that Mark Foods knew about the specific agreement with CSB. Because this element was not plausibly alleged, the court affirmed the district court’s order dismissing the case with prejudice. View "Kendell Seafood Imports, Inc. v. Mark Foods, LLC" on Justia Law

The plaintiffs, who were long-time friends of the defendants, invested significant sums in a biopharmaceutical company controlled by the defendants. The defendants did not disclose that the company was in serious financial distress, under a substantial obligation to a lender, and prohibited from incurring additional debt. The investment was structured through promissory notes, which included false warranties regarding the company’s financial status and claimed the formation of a new entity that never materialized. Instead of funding a new venture, the defendants used the investment to pay off existing company debt. Less than two years later, the company declared bankruptcy, making the notes essentially worthless.The plaintiffs brought claims under federal and Massachusetts securities laws, the Massachusetts consumer protection statute, and for common law fraud and negligent misrepresentation in the United States District Court for the District of Massachusetts. The defendants moved to dismiss the action, relying on a forum selection clause in the promissory notes requiring litigation in Delaware courts. The district court granted the motion and dismissed the case without prejudice, concluding that the clause applied to the plaintiffs’ claims.On appeal, the United States Court of Appeals for the First Circuit reviewed the dismissal de novo. The plaintiffs argued that their claims did not “arise out of” the notes and that the forum selection clause was unenforceable as contrary to Massachusetts public policy. The First Circuit rejected both arguments, holding that the claims arose from the notes and that the plaintiffs did not meet the heavy burden required to invalidate the clause on public policy grounds. The First Circuit affirmed the district court’s dismissal without prejudice, leaving the plaintiffs free to pursue their claims in the contractually designated Delaware courts. View "Manzo v. Wohlstadter" on Justia Law

Gregory Parzych served as president of ZipBy USA, LLC, a parking technology company, after previously founding and selling a similar company, TCS. While employed by ZipBy, Parzych entered into several agreements restricting conflicts of interest and disclosure of confidential information. In 2020, Parzych learned that TCS might be for sale. He advised ZipBy’s owner against pursuing the acquisition, then secretly attempted to purchase TCS for himself via a shell company, using financial information he had obtained as a ZipBy executive. ZipBy discovered his actions, terminated his employment, and, along with affiliates, sued Parzych for breach of fiduciary duty, breach of contract, misappropriation of trade secrets, trademark infringement, and false designation.After a jury trial in the United States District Court for the District of Massachusetts, the jury found for ZipBy on all claims, awarding compensatory and exemplary damages. The district court later granted judgment as a matter of law for Parzych on the trade secret claims, striking the exemplary damages but upholding the other verdicts and damages. The court also entered a permanent injunction barring Parzych from acquiring TCS and awarded ZipBy a portion of its attorneys’ fees. Parzych appealed, contesting evidentiary rulings, denial of a trial continuance, and the fee award, while ZipBy cross-appealed the judgment on the trade secret claims.The United States Court of Appeals for the First Circuit affirmed the district court’s judgment. It held that the district court did not abuse its discretion in admitting ZipBy’s expert lost-profits testimony, excluding late-disclosed evidence, or denying a trial continuance due to counsel’s COVID-19 infection. The appellate court agreed with the district court’s judgment as a matter of law against ZipBy’s trade secret claims, finding insufficient evidence that Parzych’s actions constituted trade secret misappropriation. Finally, the fee award was affirmed as a reasonable enforcement of the IP Agreement’s fee-shifting provision. View "ZipBy USA LLC v. Parzych" on Justia Law

A group of individuals participated in a complex securities fraud scheme over nearly a decade, orchestrated by a central figure, with each playing specialized roles. The operation involved acquiring large volumes of penny stocks, artificially inflating their value through paid promotions, and then selling these stocks at inflated prices (“pump and dump” schemes). The participants concealed their ownership through nominee companies and offshore accounts, and maintained records in an encrypted internal system. The scheme generated over $1 billion in gross proceeds, and its participants went to great lengths to avoid detection and regulatory scrutiny.The Securities and Exchange Commission (SEC) initiated a civil enforcement action in the United States District Court for the District of Massachusetts against various defendants, including those currently appealing. Some defendants went to jury trial, while others conceded liability and proceeded to remedies. The district court admitted evidence from the internal accounting system, found the jury’s verdicts supported by sufficient evidence, and denied motions to dismiss. For those who conceded liability, the court assessed appropriate remedies, including disgorgement and civil penalties.On appeal, the United States Court of Appeals for the First Circuit reviewed the evidentiary rulings, jury instructions, and remedies imposed. The Court held that the district court properly admitted the internal accounting evidence and that the jury instructions correctly stated the law. The evidence was sufficient to support the verdicts. The Court affirmed the district court’s use of joint and several liability for disgorgement due to the appellants’ concerted wrongdoing, and held that the SEC’s calculations were a reasonable approximation of unjust gains. The First Circuit also upheld the application of the extended statute of limitations under the National Defense Authorization Act. The Court affirmed all remedies except one aspect of an injunction, which it vacated and remanded for clarification. View "Securities and Exchange Commission v. Gasarch" on Justia Law

A dispute arose between two siblings, Wayne Orkin and Lisa Albert, over the operation and ownership of a business called Boost Web SEO, Inc. Orkin managed the day-to-day business and generated all of its revenue, while Albert incorporated the company and was listed as its registered agent and officer. No written agreements clarified their roles, profit sharing, or compensation. In 2014, residual income from a payment processing arrangement was assigned to Boost Web, which both parties treated as company revenue for years. In 2021, after a breakdown in their relationship, Albert cut Orkin’s access to company funds and accused him of fraudulent activities in communications with a third-party vendor. Orkin then redirected company revenues to an account he controlled, prompting legal action.The litigation began in Massachusetts Superior Court, where Orkin (and his father) sued Albert and her son for various state-law claims, and Albert removed the case to the U.S. District Court for the District of Massachusetts. Boost Web intervened with a crossclaim against Orkin. After partial summary judgment, the remaining claims—Orkin’s defamation and related claims against Albert, and Boost Web’s conversion claim against Orkin—proceeded to a bench trial. The district court ruled for Albert on the defamation claim, finding her email was not defamatory or was protected as true, and for Boost Web on conversion, awarding it damages for funds Orkin took as personal expenses and for redirected residuals. The court also found Orkin in contempt for interfering with its orders and permanently enjoined him from pursuing related litigation in Florida.The United States Court of Appeals for the First Circuit reviewed the case. It held that the district court erred in dismissing Orkin’s defamation claim, finding that Albert’s email could be defamatory per se and remanded for further proceedings on truthfulness. It affirmed the conversion judgment regarding the redirected residuals but vacated the judgment concerning personal expenses, holding that Orkin was entitled to some compensation and remanded to determine the appropriate amount. The court vacated the contempt order and the permanent injunction, finding the previous orders did not unambiguously decide Boost Web’s ownership. The case was remanded for further proceedings consistent with these holdings. View "Orkin v. Albert" on Justia Law

Craig Medoff, after a history of violating federal securities laws and failing to comply with prior court orders and penalties, was subject to a 2016 consent judgment in the District of Massachusetts that barred him and any entity he controlled from participating in the issuance, offer, or sale of any security for ten years. Despite this, Medoff continued to control Nova Capital International LLC and engaged in securities-related activities, using an alias and receiving substantial fees in violation of the judgment. The SEC initiated civil contempt proceedings, but the district court, concerned about the futility of further civil sanctions given Medoff’s history and financial situation, instead initiated criminal contempt proceedings under 18 U.S.C. § 401(3) and Federal Rule of Criminal Procedure 42(a).The United States District Court for the District of Massachusetts appointed the U.S. Attorney to prosecute the criminal contempt case. Medoff’s counsel moved for the judge’s recusal under 28 U.S.C. § 455(a), arguing that the judge’s impartiality might reasonably be questioned due to his comments and conduct during the proceedings. The district court denied the recusal motion, finding no reasonable basis for doubting its impartiality, and proceeded with the criminal case. Medoff ultimately pleaded guilty to criminal contempt and was sentenced to twenty months in prison, a variance above the guideline range, and thirty-six months of supervised release, along with a fine.On appeal to the United States Court of Appeals for the First Circuit, Medoff challenged the denial of the recusal motion and the reasonableness of his sentence. The First Circuit held that the district court did not abuse its discretion in denying recusal, as the judge’s actions did not display deep-seated antagonism or favoritism. The court also found the sentence both procedurally and substantively reasonable, affirming the district court’s judgment. View "United States v. Medoff" on Justia Law

The defendant formed a company in 2005 that solicited funds from clients through financial agreements promising fixed returns, with the stated purpose of developing various businesses. Clients entered into these agreements, called "Productive Development Contracts," by making monetary contributions in exchange for promised earnings. The company failed to fulfill its obligations, and the government alleged that the defendant operated a Ponzi scheme, using funds from later clients to pay earlier ones, without generating legitimate profits. The indictment listed specific transactions involving eight clients, and at trial, both these and additional clients testified about their experiences and losses.The case was tried in the United States District Court for the District of Puerto Rico. The government presented evidence including client testimony, bank records, and summary exhibits prepared by a forensic accountant. The defendant objected to the admission of certain summary exhibits under Federal Rule of Evidence 1006, arguing they contained hearsay and improper conclusions. The district court overruled these objections, and the jury convicted the defendant on all counts. At sentencing, the court calculated loss and restitution amounts based on both testifying and non-testifying victims, resulting in a sentence of 135 months’ imprisonment and a restitution order exceeding $2.1 million. The defendant appealed, challenging the evidentiary rulings, sufficiency of the evidence, sentencing calculations, and restitution order.The United States Court of Appeals for the First Circuit affirmed the securities fraud conviction, sentence, and restitution order, but vacated the bank fraud convictions at the government’s request. The court held that any error in admitting the summary exhibits was harmless given the overwhelming unchallenged evidence. It found sufficient evidence supported the jury’s finding that the contracts were securities under the law. The court also upheld the district court’s loss and restitution calculations, concluding they were supported by reliable evidence and not plainly erroneous. View "United States v. Maldonado-Vargas" on Justia Law

Two individuals, along with other plaintiffs, filed suit under Section 7 of the Clayton Act to block a proposed merger between two airlines. After their case was filed, the U.S. Department of Justice, joined by several states and the District of Columbia, brought a separate action challenging the same merger. Both cases were assigned to the same judge in the U.S. District Court for the District of Massachusetts, but were not consolidated. The district court found that only two of the original plaintiffs had standing, dismissing the others. The plaintiffs’ request to consolidate their case with the DOJ’s was denied.The DOJ case proceeded to trial first, resulting in a bench trial judgment that the merger violated the Clayton Act, and the court permanently enjoined the merger. The airlines appealed but later abandoned the merger and dismissed their appeal. As a result, the district court dismissed the remaining plaintiffs’ case as moot, since the relief they sought had already been granted in the DOJ case. The dismissed plaintiffs then moved for attorneys’ fees and costs, arguing they were prevailing parties under Section 16 of the Clayton Act because their efforts contributed to the outcome.The United States Court of Appeals for the First Circuit reviewed whether the plaintiffs qualified as prevailing parties eligible for attorneys’ fees. The court held that, under the standard set by Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources, a party must obtain a judicially sanctioned change in the legal relationship of the parties, such as a judgment on the merits or a consent decree. Because the plaintiffs’ case was dismissed as moot without a judgment on the merits, and they were not beneficiaries of the injunction in the DOJ case, the court concluded they were not prevailing parties. The First Circuit affirmed the district court’s denial of attorneys’ fees and costs. View "Garavanian v. JetBlue Airways Corp." on Justia Law

Investors in a major drug-development company alleged that the company and two of its officers misled them about the integrity of the company’s overseas supply chain for long-tailed macaques, which are essential for its business. After China halted exports of these monkeys due to the COVID-19 pandemic, the company shifted to suppliers in Cambodia and Vietnam, some of which were later implicated in a federal investigation into illegal wildlife trafficking. Despite public signs of the investigation and seizures of shipments, the company’s CEO assured investors that its supply chain was unaffected by the federal indictment of certain suppliers, and that the indicted supplier was not one of its own. However, evidence suggested that the company was, in fact, sourcing macaques from entities targeted by the investigation, either directly or through intermediaries.The United States District Court for the District of Massachusetts dismissed the investors’ class action complaint, finding that the plaintiffs failed to allege any false or misleading statements or scienter (intent or recklessness), and therefore did not reach the issue of loss causation. The court also dismissed the derivative claim against the individual officers.The United States Court of Appeals for the First Circuit reviewed the dismissal de novo. The appellate court held that the investors plausibly alleged that the company and its CEO knowingly or recklessly misled investors in November 2022 by assuring them that the company’s supply chain was not implicated in the federal investigation, when in fact it was. The court found these statements actionable, but agreed with the lower court that other statements about “non-preferred vendors” were not independently misleading. The First Circuit reversed the district court’s dismissal as to the November 2022 statements and remanded for further proceedings, including consideration of loss causation. Each party was ordered to bear its own costs on appeal. View "State Teachers Retirement System of Ohio v. Charles River Laboratories International, Inc." on Justia Law

In this case, the defendant, a radio talk show host and church founder, began selling bitcoin in 2014. The government investigated his bitcoin sales and charged him with conspiracy to operate an unlicensed money transmitting business, operation of an unlicensed money transmitting business, conspiracy to commit money laundering, money laundering, and tax evasion. After a jury convicted him on all counts, the district court acquitted him of the substantive money laundering count due to insufficient evidence but upheld the other convictions.The defendant appealed, arguing that the district court should not have allowed the money-transmitting-business charges to proceed to trial, citing the "major questions doctrine" which he claimed should exempt virtual currencies like bitcoin from regulatory statutes. He also contended that the evidence was insufficient to support his tax evasion conviction and that he should be granted a new trial on the money laundering conspiracy count due to prejudicial evidentiary spillover. Additionally, he argued that his 96-month sentence was substantively unreasonable.The United States Court of Appeals for the First Circuit reviewed the case. The court rejected the defendant's major questions doctrine argument, holding that the statutory definition of "money transmitting business" under 31 U.S.C. § 5330 includes businesses dealing in virtual currencies like bitcoin. The court found that the plain meaning of "funds" encompasses virtual currencies and that the legislative history and subsequent congressional actions supported this interpretation.The court also found sufficient evidence to support the tax evasion conviction, noting that the defendant had substantial unreported income and engaged in conduct suggesting willful evasion of taxes. The court rejected the claim of prejudicial spillover, concluding that the evidence related to the money laundering conspiracy was admissible and relevant.Finally, the court upheld the 96-month sentence, finding it substantively reasonable given the defendant's conduct and the factors considered by the district court. The court affirmed the district court's rulings and the defendant's convictions and sentence. View "United States v. Freeman" on Justia Law