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

Beijing Abace Biology Co., Ltd. (Abace) filed a lawsuit against Dr. Chunhong Zhang and MtoZ Biolabs, Inc. (MtoZ) after Dr. Zhang, a former employee, co-founded MtoZ, a company providing similar services to Abace. Abace claimed that Dr. Zhang breached her contract and fiduciary duty, and that MtoZ tortiously interfered with Abace's business. Dr. Zhang had signed several employment-related agreements, including non-compete clauses, while working for Abace. The dispute centered on whether these non-compete agreements were enforceable under Chinese law.The United States District Court for the District of Massachusetts granted summary judgment in favor of Dr. Zhang and MtoZ, concluding that Dr. Zhang did not fall within the categories of employees subject to non-compete agreements under Chinese law. The court found that Dr. Zhang was neither senior management nor senior technical personnel, and did not have access to trade secrets or confidential information that would justify a non-compete restriction.The United States Court of Appeals for the First Circuit reviewed the case de novo and affirmed the district court's decision. The appellate court agreed that under Chinese law, non-compete agreements are enforceable only against senior management, senior technical personnel, or employees with access to trade secrets. The court found no evidence that Dr. Zhang held a senior management or technical role, or that she had access to trade secrets. Consequently, the non-compete agreements were unenforceable, and the summary judgment in favor of Dr. Zhang and MtoZ was upheld. View "Beijing Abace Biology Co., Ltd. v. Zhang" on Justia Law

Two Massachusetts-based Volvo dealers filed a lawsuit against Volvo Car USA, Volvo Car Financial Services, and Fidelity Warranty Services, alleging violations of Massachusetts General Laws Chapter 93B. The dispute centers on Volvo-branded Prepaid Maintenance Program (PPM) contracts, which allow customers to prepay for future maintenance services at a discounted rate. Fidelity administers these contracts, which the dealers sell to their customers. The dealers claimed that the defendants were underpaying them for the parts and labor costs incurred in servicing these PPM contracts.The United States District Court for the District of Massachusetts heard cross-motions for summary judgment from both parties. The district court granted summary judgment in favor of the defendants, concluding that entities like Fidelity are not regulated by the relevant provisions of Chapter 93B. The court denied the dealers' motion for summary judgment, leading the dealers to appeal the decision.The United States Court of Appeals for the First Circuit reviewed the case and affirmed the district court's decision, but for a different reason. The appellate court held that the dealers' sale and service of the Volvo PPM are not franchise obligations under Chapter 93B. The court found that the Retailer Agreement between the dealers and Volvo USA did not obligate the dealers to sell or service the Volvo PPM. The court also noted that the dealers had the discretion to sell various financial products, including the Volvo PPM, and that servicing the PPM was not a material term of the Retailer Agreement. Therefore, Chapter 93B did not require Fidelity to reimburse the dealers at the statutory rates. View "Colony Place South, Inc. v. Volvo Car USA, LLC" on Justia Law

Local Puerto Rico merchants brought unfair competition claims against major big-box retailers, alleging that during the COVID-19 pandemic, Costco Wholesale Corp. and Wal-Mart Puerto Rico, Inc. violated executive orders limiting sales to essential goods. The plaintiffs claimed that the defendants continued to sell non-essential items, capturing sales that would have otherwise gone to local retailers, and sought damages for lost sales during the 72-day period the orders were in effect.The case was initially filed as a putative class action in Puerto Rico's Court of First Instance. Costco removed the case to federal district court under the Class Action Fairness Act (CAFA). The district court denied Costco's motion to sever the claims against it and also denied the plaintiffs' motion to remand the case to state court. The district court dismissed most of the plaintiffs' claims but allowed the unfair competition claim to proceed. However, it later denied class certification and granted summary judgment for the defendants, concluding that the executive orders did not create an enforceable duty on the part of Costco and Wal-Mart.The United States Court of Appeals for the First Circuit reviewed the case on jurisdictional grounds. The court held that CAFA jurisdiction is not lost when a district court denies class certification. It also held that CAFA's "home state" exception did not apply because Costco, a non-local defendant, was a primary defendant. However, the court found that CAFA's "local controversy" exception applied because the conduct of Wal-Mart Puerto Rico, a local defendant, formed a significant basis for the claims. The court concluded that the district court did not abuse its discretion in denying Costco's motion to sever and determined that the entire case should be remanded to the Puerto Rico courts. The court reversed the district court's denial of the motion to remand, vacated the judgment on the merits for lack of jurisdiction, and instructed the district court to remand the case to the Puerto Rico courts. View "Kress Stores of Puerto Rico, Inc. v. Wal-Mart Puerto Rico, Inc." on Justia Law

In 2020, American Airlines and JetBlue Airways formed the Northeast Alliance (NEA), a joint venture to operate as a single airline for most routes in and out of Boston and New York City. The U.S. Department of Justice (DOJ), along with several states, sued to stop the NEA, claiming it violated the Sherman Act by unreasonably restraining competition. After a bench trial, the district court ruled in favor of the plaintiffs, finding that the NEA reduced competition and output without sufficient procompetitive benefits. American Airlines appealed the decision.The district court found that the NEA caused American and JetBlue to stop competing on overlapping routes, leading to decreased capacity and reduced consumer choices. The court also found that the NEA's schedule coordination and revenue-sharing provisions effectively merged the two airlines' operations in the Northeast, which resembled illegal market allocation. The court rejected the airlines' claims that the NEA increased capacity and provided significant consumer benefits, finding these claims unsupported by reliable evidence.The United States Court of Appeals for the First Circuit reviewed the case. The court affirmed the district court's decision, agreeing that the NEA had substantial anticompetitive effects. The appellate court found no clear error in the district court's factual findings and upheld its application of the rule of reason. The court concluded that the NEA's harms outweighed any procompetitive benefits, which could have been achieved through less restrictive means. The judgment of the district court was affirmed, and the NEA was enjoined from further implementation. View "US v. American Airlines Group Inc." on Justia Law

Sophia Zhou and other investors filed a federal securities fraud class action against Desktop Metal, Inc. and several of its corporate officers after the company's stock price dropped in late 2021. The stock lost value following Desktop Metal's disclosure of an internal investigation that revealed corporate mismanagement and necessitated the recall of two key products. Zhou alleged that the defendants engaged in fraudulent schemes, including manufacturing Flexcera resin at non-FDA-registered facilities and marketing the PCA 4000 curing box for use with Flexcera without FDA certification.The United States District Court for the District of Massachusetts dismissed Zhou's complaint for failure to state a claim. Zhou appealed, arguing that the district court erred in dismissing her "scheme liability" claim and that she adequately stated a securities fraud claim based on material misrepresentations and omissions. The district court had found that Zhou did not preserve her scheme liability claim and that her complaint failed to plead any materially false or misleading statement or omission.The United States Court of Appeals for the First Circuit reviewed the case de novo. The court concluded that Zhou did not preserve her scheme liability claim because she failed to adequately argue it in her opposition to the motion to dismiss or in her supplemental briefing. The court also determined that the district court correctly found that Zhou's complaint did not allege any materially false or misleading statements. Specifically, the court held that statements about Flexcera's FDA clearance, regulatory compliance, and product qualities were not rendered misleading by the alleged omissions. Consequently, the court affirmed the district court's dismissal of Zhou's complaint. View "Zhou v. Desktop Metal, Inc." on Justia Law

Boris Bergus and Agustin Florian, both doctors, were colleagues and later co-investors in a company managed by Florian's brother-in-law, Edgardo Jose Antonio Castro Baca. Bergus invested in the company in 2012 and 2014, purchasing stock. Years later, after their relationship deteriorated, Bergus sued Florian, alleging that Florian had omitted material information about the investments, violating the Massachusetts Uniform Securities Act (MUSA). The trial featured testimony from Bergus, Florian, and Baca. The district court precluded Florian from cross-examining Bergus about a 2013 state medical board finding that Bergus had misrepresented his medical credentials. The jury found in favor of Bergus regarding the 2012 investment but not the 2014 investment.The United States District Court for the District of Massachusetts ruled in favor of Bergus for the 2012 investment, awarding him $125,000 plus interest, totaling $202,506.85, and additional attorney's fees and costs, bringing the total judgment to $751,234.86. The court dismissed Florian's counterclaim for abuse of process, suggesting it be litigated in state court.On appeal, the United States Court of Appeals for the First Circuit reviewed several issues, including the district court's limitation on Florian's cross-examination of Bergus. The appellate court found that the district court abused its discretion by precluding cross-examination about Bergus's misrepresentations of his medical credentials, which were probative of his character for truthfulness. The court concluded that this error was not harmless, as the case hinged on the credibility of the witnesses.The First Circuit vacated the judgment regarding the 2012 investment and remanded for a new trial on that issue. The jury's verdict on the 2014 investment remained intact. The appellate court did not address Florian's other arguments due to the need for a new trial. View "Bergus v. Florian" on Justia Law

The case involves BioPoint, Inc., a life sciences consulting firm, which accused Catapult Staffing, LLC, and Andrew Dickhaut of misappropriating trade secrets, confidential business information, and engaging in unfair trade practices. BioPoint alleged that Catapult, with the help of Dickhaut and Leah Attis (a former BioPoint employee and Dickhaut's fiancée), used BioPoint's proprietary information to recruit candidates and secure business from BioPoint's clients, including Vedanta and Shire/Takeda.The U.S. District Court for the District of Massachusetts handled the initial proceedings. The jury found Catapult liable for misappropriating BioPoint's trade secrets concerning three candidates and two clients, and for tortious interference with BioPoint's business relationship with one candidate. The jury awarded BioPoint $312,000 in lost profits. The judge, in a subsequent bench trial, found Catapult liable for unjust enrichment and violations of the Massachusetts Consumer Protection Law (chapter 93A), awarding BioPoint $5,061,444 in damages, which included treble damages for willful and knowing conduct, as well as costs and attorneys' fees.The United States Court of Appeals for the First Circuit reviewed the case. The court largely affirmed the lower court's findings but reduced the judge's award by $157,068, as it found that BioPoint could not recover both lost profits and unjust enrichment for the same placement. The court also reversed the district court's imposition of joint-and-several liability on Andrew Dickhaut, ruling that he could not be held liable for profits he did not receive. The case was remanded for further proceedings to determine Dickhaut's individual liability. View "BioPoint, Inc. v. Dickhaut" on Justia Law

In 2017, the SEC filed a lawsuit against investment advisers Louis Navellier and Navellier & Associates, Inc. (NAI), alleging violations of sections 206(1) and 206(2) of the Investment Advisers Act. The SEC claimed that the defendants made materially false and misleading statements about the performance track record of their investment strategies. The United States District Court for the District of Massachusetts granted summary judgment in favor of the SEC, ordering disgorgement exceeding $22 million. The defendants appealed, challenging the summary judgment, the denial of their motion to stay pending appeal, and the denial of their motion to reduce the supersedeas bond.The district court found that the defendants had violated sections 206(1) and 206(2) by making false statements about the inception date and performance of the AlphaSector strategy, which they marketed as having been live-traded since 2001. The court determined that these statements were material and that the defendants acted with scienter (intent to defraud) or, at the very least, negligence. The court also rejected the defendants' selective enforcement defense, concluding that they were not similarly situated to other firms that were not prosecuted.The United States Court of Appeals for the First Circuit reviewed the case and affirmed the district court's decisions. The appellate court agreed that the defendants' statements were false and material, and that they acted with a high degree of recklessness, satisfying the scienter requirement. The court also upheld the disgorgement order, finding it to be a reasonable approximation of the profits causally connected to the violations. The court rejected the defendants' argument that disgorgement was inappropriate because their clients did not suffer pecuniary harm, emphasizing that disgorgement is meant to deprive wrongdoers of their ill-gotten gains. Finally, the court found no abuse of discretion in the district court's decision not to reduce the supersedeas bond amount. View "SEC v. Navellier & Associates, Inc." on Justia Law

The case revolves around Frequency Therapeutics, a biotech startup that was developing a treatment for severe sensorineural hearing loss called "FX-322". Initial trials were positive, but subsequent testing yielded disappointing results, causing a sharp drop in Frequency's stock price. Three stockholders filed a class action lawsuit alleging violations of sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, and Securities and Exchange Commission Rule 10b-5. They claimed that Frequency's CEO, David Lucchino, and its Chief Development Officer, Carl LeBel, knew of problems with the study before the results were announced, yet gave investors assurances to the contrary.The United States District Court for the District of Massachusetts dismissed the complaint, finding that the plaintiffs failed to allege sufficient facts to support a finding of scienter under the Private Securities Litigation Reform Act. The plaintiffs appealed to the United States Court of Appeals for the First Circuit.The Court of Appeals affirmed the dismissal. The court found that the plaintiffs failed to demonstrate that the defendants had made the false statements with the degree of scienter required to state a Securities and Exchange Act claim. The court noted that the complaint did not provide specific facts about when the defendants learned of the adverse events, which was a glaring omission. The court also found that the increase in stock sales by the CEO was not sufficient to establish an inference of scienter on its own. The court concluded that the plaintiffs' allegations, taken collectively, did not give rise to a strong inference of scienter. View "Quinones v. Frequency Therapeutics, Inc." on Justia Law

The case involves a dispute over the rights of parties holding certain revenue bonds issued by the Puerto Rico Electric Power Authority ("PREPA") before it entered reorganization proceedings under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"). The Financial Oversight and Management Board for Puerto Rico ("the Board") filed an adversary proceeding within the Title III restructuring proceeding to define the rights and remedies that bondholders had against PREPA. The United States District Court for the District of Puerto Rico held that the bondholders only had a secured claim on moneys deposited into the Sinking and Subordinate Funds, and that the bondholders had an unsecured claim on PREPA's Net Revenues.The United States Court of Appeals for the First Circuit disagreed with the district court's findings. The appellate court held that the bondholders have a lien on PREPA's present and future Net Revenues, and that the bondholders' lien is not avoidable. The court also held that the proper amount of the bondholders' claim is the face value (i.e., principal plus matured interest) of the Revenue Bonds. The court affirmed the district court's dismissal of the bondholders' breach of trust claim, but reversed the dismissal of the bondholders' accounting claim. The case was remanded for further proceedings consistent with the appellate court's opinion. View "Financial Oversight and Management Board v. U.S. Bank National Assn." on Justia Law