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

In 2007-2008, Textron made public statements assuring investors of the strength and depth of the backlog of orders to carry it through difficult economic times. In January 2008 an officer referred to "unusually low cancellations." Several similar statements followed. In a 2009 analyst report, J.P. Morgan wondered "how we go from 3.5 years of backlog six months ago to a 20% y/y production decline for 2009 that is only 80% sold out." Plaintiffs, purchasers of Textron securities, claim that for more than 18 months, Textron misstated the strength of the backlog. The complaint does not challenge the technical accuracy of most of Textron's statements, but claimed that Textron deliberately omitted material information, that Textron's officers could not have believed the truth of their unrelentingly positive statements, and that certain factual statements about cancellation figures were false when made. The main thrust of plaintiffs' complaint concerned failure to disclose information about the weakness of the backlog due to relaxed financing arrangements and other practices. The district court dismissed. The First Circuit affirmed. The complaint was deficient; the materiality issue was a close call, but the complaint failed to plead facts justifying a reasonable inference of scienter. View "Auto. Indus. Pension Trust Fund v. Textron Inc." on Justia Law

Plaintiff contracted to sell a furniture business to Mendoza in 2004. Westernbank provided partial funding and obtained a first mortgage. To secure a deferred payment of $750,000, Mendoza signed a mortgage in favor of plaintiff and a contract under which plaintiff consigned goods with expected sales value of more than $6,000,000. An account was opened at Westernbank for deposit of sales proceeds. Plaintiff alleges that Westernbank kept funds to which plaintiff was entitled for satisfaction of Mendoza’s debts to Westernbank. Mendoza filed for bankruptcy and transferred its real estate to Westernbank in exchange for release of debt to the bank. Plaintiff agreed to forgive unpaid debts in order to obtain relief from the stay and foreclose its mortgage, then sued Westernbank, employees, and insurers, alleging violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961-68, and Puerto Rico law causes of action. After BPPR became successor to Westernbank, plaintiff agreed to dismiss the civil law fraud and breach of fiduciary duty claims and the RICO claim. The district court later dismissed remaining claims for lack of subject matter jurisdiction, declining to exercise supplemental jurisdiction over non-federal claims. The First Circuit affirmed. View "Fabrica de Muebles J.J. Alvare v. Inversiones Mendoza, Inc." on Justia Law

GMG contracted with Amicas to develop and license computer programs to accept information from a radiology patient management system established by Sage and send information to a billing system established by Sage. The warranty excluded any failure resulting from databases of GMG or third parties and warned that Amicas did not warrant that the software would meet GMG’s requirements. Amicas worked with Sage on the interfaces. GMG began using the programs and reported problems, eventually returning to its old method of manual processing, but did not inform Amicas of that decision or of persistent problems with the interface. GMG began negotiating with Sage to develop substitute software. When Amicas became aware of problems with the interface, it worked with Sage to resolve the concerns, but GMG sent Amicas a termination notice, citing failure to deliver a functional product. The district court found for Amicas on its breach of contract claim, rejected counterclaims, and awarded $778,889 in damages, $324,805 in attorneys’ fees, plus costs and interest. The Third Circuit affirmed, finding that Amicas satisfied its burden of proving performance and that GMG offered only conclusory allegations of noncompliance. View "Amicas, Inc. v. GMG Health Sys., LTD." on Justia Law

Companion was authorized to license space in Wal-Mart stores to companies that sell durable medical equipment and entered into licensing agreements with defendants. In 2007, defendants shut down operations. Companion sued. Problems arose during discovery, including defense counsel motions to withdraw, allegations of inadequate responses to discovery requests, objections to the scope of discovery, refusal to attend depositions, motions to compel, multiple extensions, and claims of obstruction. After three years, the district judge imposed a default as to all counts, based on discovery violations by the defendants. The court eventually lifted the default except as to Companion's veil piercing claim, allowing the substantive claims to go to trial. A jury found for Companion and awarded more than $1 million in damages. Defendants, personally liable as a result of the default, appealed. The First Circuit vacated the default and remanded, "because the district court imposed such a severe sanction based on a very limited slice of the relevant facts." View "Companion Health Servs, v. Majors Mobility, Inc." on Justia Law

For 30 years, GE manufactured electric capacitors containing Pyranol, an insulation containing PCBs and stored scrap in drums. It sold the scrap to Fletcher, who used it as a paint additive. Fletcher purchased more than 200,000 gallons of GE's scrap Pyranol until 1967. After failing to pay for 14 shipments, Fletcher proposed that GE retrieve the drums. GE did not follow up. In 1987, EPA found hundreds of unmarked drums containing scrap Pyranol at the Fletcher Site. Several had leaked. EPA installed a temporary cap, added the site to the Superfund List, and sought to recover costs under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9607(a)(3). A 1994 consent decree stipulated that GE would pay costs incurred through April, 1993. GE did not concede liability. In 2006, the government sought recovery for post-1993 costs. The First Circuit affirmed the district court's entry of judgment for the government on "arranger" liability. GE was aware that Fletcher had drums that would not be used and made no effort to deal with it. The court also rejected a statute of limitations defense. View "United States v. Gen. Elec. Co." on Justia Law

Plaintiffs brought separate suits alleging unlawful retaliation by their corporate employers, which are private companies that act as contract advisers to and managers of mutual funds organized under the Investment Company Act of 1940. The district court addressed both cases in a single order, holding that the whistleblower protection provision within the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1514A extends beyond "employees" of "public" companies to encompass employees of private companies that are contractors or subcontractors to those public companies if the employees report violations "relating to fraud against shareholders." The First Circuit reversed, concluding that the protections are limited to employees of public companies, as defined by the statute.

In 2005, plaintiff began consulting for defendant and signed an agreement prohibiting disclosure of proprietary information to third parties, and a non- competition covenant effective during his employment and for two years thereafter. In July, 2006, he left the company. In January 2007, he began consulting for another company. Defendant sued under the agreement. The company filed for bankruptcy. A purchaser moved to substitute itself as plaintiff, but the state court dismissed without prejudice for failure to prosecute. After the court reinstated the case, plaintiff filed in federal court, alleging that the state court suit constituted abuse of process under Massachusetts law and seeking to enjoin the proceedings. He alleged that the amount in controversy was "at least $1,000,000," based on "emotional distress" and harm to his reputation, emotional tranquility, and privacy. The district court dismissed. The First Circuit affirmed. Plaintiff failed to allege damages with substantial particularity to establish jurisdiction. He provided no substantiation for or valuation of any of the alleged economic, emotional or physical damages and could not meet the "good faith" requirement with respect to his assertions.

A business entity sued an investment fund manager for fraud in Massachusetts state court. Defendant removed to federal court, which dismissed based on the statute of limitations. On appeal, the Sixth Circuit noted that the allegations were insufficient to establish diversity jurisdiction and instructed plaintiff to identify the citizenship of all of its members. Plaintiff did not comply, but simply asserted that none of its members shared defendant's Rhode Island citizenship. The court stated that it could not proceed to judgment with the information it had and ordered plaintiff to provide the necessary information, under seal.

The companies are direct competitors in importing and distributing pharmaceutical ingredients manufactured in China. Plaintiff claimed that defendant intentionally interfered with one of its contracts and sought damages. In court-ordered settlement negotiations, plaintiff demanded $675,000. Defendant made a counter-offer, demanding that plaintiff pay it $444,444.44 in order to settle the case and avoid a motion for sanctions and a suit for malicious prosecution. The court noted that the peculiar amount was due to the fact that the number four is considered an unlucky number in Chinese culture because it is homophonous with the Chinese word for death, but concluded that it was not a death threat and declined to impose sanctions. The court later entered summary judgment for defendant. The First Circuit affirmed the court's refusal to impose sanctions under FRCP 11. Plaintiff's claims were not patently frivolous.

Plaintiff alleged antitrust violations of the Clayton Act, 15 U.S.C. 12-27, and Sherman Act, 15 U.S.C. 1-7, and violations of Puerto Rico law based on defendants' merger and later activities. Plaintiff has been a competitor with defendant in the ice cream distribution market. The district court granted summary judgment to defendants.The First Circuit affirmed. Plaintiff was not negatively affected by purported violations, there is no evidence of increased consumer prices or reduced output. The challenged conduct has been in place for at least two years and the remaining market remains robustly competitive as evidenced by ongoing entry, profitability of rivals, and stability of their aggregate market share.