Justia U.S. 1st Circuit Court of Appeals Opinion Summaries
Articles Posted in Contracts
DraftKings Inc. v. Hermalyn
Michael Hermalyn, a former employee of DraftKings, left his position to join a rival company, Fanatics, based in California. DraftKings, headquartered in Massachusetts, claimed that Hermalyn's new role violated a noncompete agreement he had signed, which included a Massachusetts choice-of-law provision and a one-year noncompete clause. DraftKings sued Hermalyn in the U.S. District Court for the District of Massachusetts for breach of the noncompete agreement.The district court sided with DraftKings, applying Massachusetts law to determine the enforceability of the noncompete agreement. The court found the noncompete enforceable and issued a preliminary injunction preventing Hermalyn from competing against DraftKings in the United States for one year. Hermalyn appealed, arguing that California law, which generally bans noncompetes, should apply instead of Massachusetts law. Alternatively, he argued that if Massachusetts law applied, the injunction should exclude California.The United States Court of Appeals for the First Circuit reviewed the case. The court examined whether the district judge abused her discretion in granting the preliminary injunction and whether she made any legal errors in applying Massachusetts law. The appellate court found that Massachusetts law was correctly applied, noting that Massachusetts generally respects choice-of-law provisions unless they violate a fundamental policy of another state with a materially greater interest. The court concluded that Hermalyn failed to demonstrate that California's interest in banning noncompetes was materially greater than Massachusetts's interest in enforcing them.The First Circuit also upheld the scope of the preliminary injunction, rejecting Hermalyn's argument to exclude California. The court reasoned that excluding California would undermine the effectiveness of the injunction, as Hermalyn's role involved interacting with clients in states where online sports betting is legal. Consequently, the appellate court affirmed the district court's decision and awarded costs to DraftKings. View "DraftKings Inc. v. Hermalyn" on Justia Law
Liberty Mutual Insurance v. Digitas, Inc.
Ken Johansen filed a lawsuit against Liberty Mutual, alleging violations of the Telephone Consumer Protection Act (TCPA). Liberty Mutual had contracted with Digitas, Inc. for marketing services, which included ensuring compliance with legal requirements. Johansen's complaint stemmed from telemarketing calls he received, which were traced back to Spanish Quotes, a subcontractor of Digitas. Liberty Mutual sought indemnification from Digitas under their Master Services Agreement (MSA), which included a warranty and indemnification clause.The United States District Court for the District of Massachusetts reviewed the case and found that Digitas had breached its contractual duty to indemnify Liberty Mutual. The court partially granted Liberty Mutual's motion for summary judgment, determining that Digitas had violated its warranty by allowing telemarketing practices that led to Johansen's complaint. The court also found that Liberty Mutual had met the preconditions for triggering Digitas's indemnity obligation. However, the court did not determine the damages and closed the case, leading Digitas to appeal.The United States Court of Appeals for the First Circuit reviewed the appeal. The court affirmed the district court's decision, agreeing that Digitas breached its warranty and that Liberty Mutual satisfied the preconditions for indemnification. The appellate court concluded that the MSA did not require a finding of actual liability for the indemnity obligation to be triggered. The court also found that Liberty Mutual had provided Digitas with the opportunity to control the defense, which Digitas did not properly assume. The case was remanded for further proceedings to address any remaining issues, including the determination of damages. View "Liberty Mutual Insurance v. Digitas, Inc." on Justia Law
Posted in:
Consumer Law, Contracts
Holsum de Puerto Rico, Inc. v. ITW Food Equipment Group LLC
Holsum de Puerto Rico, Inc. ("Holsum") contracted with Peerless Food Equipment ("Peerless") to manufacture a machine for sandwiching cookies and with Compass Industrial Group, LLC ("Compass") for a tray-loader machine. The machines malfunctioned, leading Holsum to sue both companies for breach of contract and negligence. The jury found in favor of Holsum against Compass but ruled in favor of Peerless. Peerless then sought attorney fees from Holsum, citing a fee-shifting provision in their contract and a Puerto Rico court rule.The United States District Court for the District of Puerto Rico denied Peerless's motion for attorney fees. The court found that the fee-shifting provision was not clearly incorporated into the contract through a hyperlink and that Holsum did not act obstinately or frivolously in bringing its claims against Peerless. Peerless appealed this decision.The United States Court of Appeals for the First Circuit affirmed the district court's decision. The appellate court agreed that the contract did not clearly communicate the incorporation of the fee-shifting provision via the hyperlink. Additionally, the court found no abuse of discretion in the district court's determination that Holsum's claims were not frivolous and that Holsum did not act obstinately in refusing to settle before trial. The appellate court emphasized that exercising the right to a jury trial in good faith does not constitute obstinacy. View "Holsum de Puerto Rico, Inc. v. ITW Food Equipment Group LLC" on Justia Law
Deutsche Bank National Trust Company v. Wilson
In 2006, Lisa Wilson's late husband, Mason, purchased a home in Coventry, Rhode Island, financing it with a $150,000 mortgage. Both Mason and Lisa signed the mortgage agreement, but only Mason signed the promissory note. The mortgage agreement included covenants requiring the "Borrowers" to defend the title, pay property taxes, and discharge any superior liens. In 2007, Deutsche Bank acquired the mortgage and note. Mason defaulted on the mortgage payments, and the Wilsons failed to pay property taxes, leading to a tax sale in 2014. Birdsong Associates bought the property and later obtained a court decree extinguishing Deutsche Bank's mortgage lien. Birdsong then sold the property to Coventry IV-14, RIGP, which eventually sold it to Dunkin Engineering Solutions, LLC, a company formed by Mason's parents. After Mason's parents' deaths, Lisa became the sole owner of Dunkin.Deutsche Bank sued Lisa, Mason, and Dunkin in the United States District Court for the District of Rhode Island, alleging breach of the mortgage covenants and seeking equitable relief. The district court granted summary judgment to Lisa and Dunkin, finding that the mortgage agreement had been extinguished by the 2016 court decree and that Deutsche Bank had no remaining contractual rights. The court also rejected Deutsche Bank's equitable claims, concluding that there was no evidence of a scheme to benefit Lisa and Mason and that no benefit had accrued to Dunkin or Lisa from Deutsche Bank's payments.The United States Court of Appeals for the First Circuit affirmed the district court's decision. The court held that the mortgage agreement did not unambiguously bind Lisa to the covenants, and thus, Deutsche Bank could not enforce those covenants against her. The court also found that Deutsche Bank failed to establish a fiduciary or confidential relationship necessary for its equitable claims and that Deutsche Bank's payments did not unjustly enrich Dunkin or Lisa. View "Deutsche Bank National Trust Company v. Wilson" on Justia Law
American Board of Internal Medicine v. Salas-Rushford
A physician in Puerto Rico, Dr. Jaime Salas Rushford, had his board certification suspended by the American Board of Internal Medicine (ABIM) after ABIM concluded that he had improperly shared board exam questions with his test prep instructor. ABIM sued Salas Rushford for copyright infringement in New Jersey. Salas Rushford counterclaimed against ABIM and several ABIM-affiliated individuals, alleging that the process leading to his suspension was a "sham."The counterclaims were transferred to the District of Puerto Rico, where the district court granted ABIM's motion for judgment on the pleadings and denied Salas Rushford leave to amend his pleading. The court found that Salas Rushford failed to state a claim for breach of contract, breach of the implied covenant of good faith and fair dealing, and tort claims against the ABIM Individuals. The court also dismissed his Lanham Act claim for commercial disparagement.The United States Court of Appeals for the First Circuit reviewed the case. The court affirmed the district court's dismissal of Salas Rushford's claims. It held that ABIM had broad discretion under its policies to revoke certification if a diplomate failed to maintain satisfactory ethical and professional behavior. The court found that Salas Rushford did not plausibly allege that ABIM acted with bad motive or ill intention, which is necessary to state a claim for breach of the implied covenant of good faith and fair dealing under New Jersey law.The court also affirmed the dismissal of the Lanham Act claim, noting that Salas Rushford failed to allege actual consumer deception or intentional deception, which is required to state a claim for false advertising. Finally, the court upheld the district court's denial of leave to amend the complaint, citing undue delay and lack of a concrete argument for why justice required an amendment. View "American Board of Internal Medicine v. Salas-Rushford" on Justia Law
Roberge v. Travelers Property Casualty Co. of America
Cynthia Roberge, a State of Rhode Island employee, was involved in a car accident with an underinsured motorist while driving her personal vehicle during the course of her employment. She sought uninsured/underinsured motorist (UM/UIM) coverage under the State's insurance policy issued by Travelers Property Casualty Company of America. Travelers denied her claim, stating that she was not entitled to UM/UIM coverage because she was not driving a "covered auto" as defined by the policy.Roberge filed a lawsuit in Providence County Superior Court, asserting claims for breach of contract, declaratory judgment, and bad faith. Travelers removed the case to the United States District Court for the District of Rhode Island. The district court granted summary judgment in favor of Travelers, concluding that Roberge was not entitled to UM/UIM coverage under the policy's terms and that neither the Rhode Island Supreme Court's decision in Martinelli v. Travelers Insurance Companies nor the Rhode Island Uninsured Motorist Statute required such coverage.On appeal, the United States Court of Appeals for the First Circuit reviewed the case. The court noted that the policy's language clearly excluded Roberge from UM/UIM coverage because she was not driving a "covered auto." However, the court found that the case raised unresolved questions of Rhode Island insurance law, particularly regarding the applicability of the Martinelli exception and the requirements of the Rhode Island Uninsured Motorist Statute. The First Circuit decided to certify two questions to the Rhode Island Supreme Court: whether an employee must be considered a named insured under an employer's auto insurance policy when operating a personal vehicle in the scope of employment, and whether it violates Rhode Island law and public policy for an employer's policy to provide liability but not UM/UIM coverage to employees in such circumstances. The case was stayed pending the Rhode Island Supreme Court's response. View "Roberge v. Travelers Property Casualty Co. of America" on Justia Law
Southbridge RE, LLC v. Kiavi Funding, Inc.
Southbridge RE, LLC (Southbridge) executed promissory notes and secured mortgages for two properties in Massachusetts with LendingHome, which later assigned the mortgages to Christiana Trust. However, LendingHome had previously issued blank assignments of the same mortgages to Toorak Capital Partners as security for a private funding agreement. Toorak filled in its name and recorded the assignments after Southbridge defaulted on the mortgages. Christiana Trust conducted foreclosure sales on both properties, which Southbridge contested, arguing that the blank assignments to Toorak broke the chain of title, rendering the foreclosures invalid.The United States District Court for the District of Massachusetts found that the blank assignments to Toorak were void under Massachusetts law and granted summary judgment in favor of Christiana Trust, declaring it had the authority to conduct the foreclosure sales. The court denied Southbridge's motion for summary judgment and defendants' cross-claims for slander of title, unjust enrichment, and promissory estoppel. Southbridge appealed the decision.The United States Court of Appeals for the First Circuit affirmed the district court's judgment. The appellate court held that under Massachusetts law, assignments in blank are void and convey no interest. The court found that Toorak's filling in its name on the blank assignments did not validate them, as Toorak lacked authorization from LendingHome. The court also determined that post-foreclosure affidavits confirming the invalidity of the Toorak assignments were proper and did not contravene state law. Additionally, the court ruled that the foreclosure sale notices did not need to reference the void Toorak assignments, as they were not part of the chain of title. Thus, the foreclosure sales conducted by Christiana Trust were valid. View "Southbridge RE, LLC v. Kiavi Funding, Inc." on Justia Law
Posted in:
Contracts, Real Estate & Property Law
FOMB v. AmeriNational Community Services, LLC
The case involves the restructuring of Puerto Rico's public debts under Title VI of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). The dispute centers on whether the final transaction documents or the preliminary documents control the terms of the debt restructuring. The preliminary documents included a Valid Claim Requirement, which stipulated that new bonds would only be issued if valid claims were made. However, the final transaction documents did not include this requirement.The U.S. District Court for the District of Puerto Rico initially approved the restructuring plan, which included the terms set forth in the preliminary documents. However, the court also noted that the final terms would be subject to the execution and delivery of definitive documents. When the final documents were executed, they did not include the Valid Claim Requirement. The district court later ruled that the final documents, not the preliminary ones, governed the transaction, and overruled objections based on the omission of the Valid Claim Requirement.The United States Court of Appeals for the First Circuit reviewed the case. The court affirmed the district court's decision, holding that the final transaction documents control the terms of the debt restructuring. The court emphasized that the preliminary documents were explicitly provisional and subject to final documentation. The final documents, which did not include the Valid Claim Requirement, were deemed to be the definitive terms of the restructuring. The court also noted that the Requisite Bondholders had approval rights over the final documents and did not object to the absence of the Valid Claim Requirement.Thus, the First Circuit affirmed the district court's ruling, concluding that the final transaction documents govern the debt restructuring, and the Valid Claim Requirement from the preliminary documents does not apply. View "FOMB v. AmeriNational Community Services, LLC" on Justia Law
Posted in:
Contracts, Government & Administrative Law
Analog Technologies, Inc. v. Analog Devices, Inc.
The case involves Analog Technologies, Inc. ("ATI") and its CEO Dr. Gang Liu, who accused Analog Devices, Inc. ("ADI") of misappropriating trade secrets under federal and Massachusetts law. ATI claimed that they took reasonable measures to maintain the secrecy of development materials shared with ADI, and ADI violated its obligation to limit its use of those materials. The dispute originated from two agreements: a 2000 agreement, which included a confidentiality clause that expired five years after termination, and a 2015 agreement, which superseded the 2000 agreement and released ADI from any claims related to the 2000 agreement.The U.S. District Court for the District of Massachusetts granted ADI's motion to dismiss the claim, ruling that any restrictions on ADI's use of the materials had expired under the clear terms of the written agreement among the parties. The court also found that there were no trade secrets under the 2000 agreement still in existence to have been misappropriated in 2021.On appeal, the United States Court of Appeals for the First Circuit affirmed the lower court's decision. The appellate court concluded that ADI did not misappropriate the development materials as the restrictions on ADI's use of these materials under the 2000 agreement had expired in 2011. Furthermore, the 2015 agreement released ADI from any remaining use restrictions. The court also rejected the argument that ADI had a duty to limit its use of the materials at the time of the alleged misappropriation, as such a duty did not exist under the 2015 agreement. View "Analog Technologies, Inc. v. Analog Devices, Inc." on Justia Law
Posted in:
Contracts, Intellectual Property
Ithier v. Aponte Cruz
This case involves a dispute between the owners of El Gran Combo, one of the most popular Puerto Rican bands in history, and the band's former lead vocalist, Carlos Aponte-Cruz. The dispute centers on the interpretation of the Digital Performance Right in Sound Recordings Act of 1995, which entitles the "recording artist or artists featured on [a] sound recording" to a 45% share of certain royalties that the recording generated. Aponte-Cruz argues that he is the "artist . . . featured" on certain El Gran Combo sound recordings for which he was the lead vocalist and is therefore entitled to his portion of the 45% share of the statutory royalties for those recordings. The owners of El Gran Combo, on the other hand, contend that the band as an independent entity distinct from any of its individual members is the "artist . . . featured" on those recordings.The United States District Court for the District of Puerto Rico ruled in favor of the owners of El Gran Combo, finding that the band, as a distinct legal entity, was the group most prominently featured on the sound recordings and thus entitled to collect the royalties as the featured artist. The court also ruled that Rafael Ithier, as the sole owner of El Gran Combo, was entitled to collect the featured artist royalties due to the corporation.On appeal, the United States Court of Appeals for the First Circuit reversed the District Court's ruling. The appellate court concluded that even though the covers for the El Gran Combo albums that contain the disputed recordings refer only to the band itself and not to any of its individual members, Aponte-Cruz, as a "recording artist . . . featured" on the recordings in dispute, is entitled to his portion of the 45% share of the statutory royalties for those recordings. The court found that neither EGC Corp. nor Ithier is entitled to the 45% royalty share in the recordings at issue. View "Ithier v. Aponte Cruz" on Justia Law