Articles Posted in Commercial Law

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Trinity Lutheran Child Learning Center, operating on church property, sought to replace its playground’s gravel surface by participating in Missouri’s Scrap Tire Program, which offers grants to qualifying nonprofit organizations that install playground surfaces made from recycled tires. The Department of Natural Resources had a strict, express policy of denying grants to any applicant owned or controlled by a church, sect, or other religious entity and denied the Center’s application, citing Missouri Constitution Article I, Section 7. The Church sued under the Free Exercise Clause of the First Amendment. The Eighth Circuit affirmed dismissal. The Supreme Court reversed. The policy violated Trinity's rights under the Free Exercise Clause of the First Amendment by denying the Church an otherwise available public benefit on account of its religious status. Laws imposing special disabilities on the basis of religious status trigger the strictest scrutiny. The Court rejected an argument that simply declining to allocate to Trinity a subsidy the state had no obligation to provide did not meaningfully burden the Church’s free exercise rights; the Free Exercise Clause protects against “indirect coercion or penalties on the free exercise of religion, not just outright prohibitions.” The express discrimination against religious exercise here is not the denial of a grant, but rather the refusal to allow the Church—solely because it is a church—to compete with secular organizations for a grant. Trinity was put to the choice between being a church and receiving a government benefit. The Department “offers nothing more than Missouri’s preference for skating as far as possible from religious establishment concerns.” View "Trinity Lutheran Church of Columbia, Inc. v. Comer" on Justia Law

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Businesses challenged New York General Business Law section 518, which provides that “[n]o seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means,” as violating the First Amendment by regulating how they communicate their prices, and as unconstitutionally vague. The Second Circuit vacated a judgment in favor of the businesses, reasoning that in the context of singlesticker pricing—where merchants post one price and would like to charge more to customers who pay by credit card—the law required that the sticker price be the same as the price charged to credit card users. In that context, the law regulated a relationship between two prices: conduct, not speech. The Supreme Court vacated, limiting its review to single-sticker pricing. Section 518 regulates speech. It is not a typical price regulation, which simply regulates the amount a store can collect. The law tells merchants nothing about the amount they may collect from a cash or credit card payer, but regulates how sellers may communicate their prices. Section 518 is not vague as applied to the businesses; it bans the single-sticker pricing they wish to employ, and “a plaintiff whose speech is clearly proscribed cannot raise a successful vagueness claim.” View "Expressions Hair Design v. Schneiderman" on Justia Law

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Corporate citizens of Delaware, Nebraska, and Illinois, sued Americold, a “real estate investment trust” organized under Maryland law, in a Kansas court. Americold removed the suit based on diversity jurisdiction, 28 U.S.C. 1332(a)(1), 1441(b). The federal court accepted jurisdiction and ruled in Americold’s favor. The Tenth Circuit held that the district court lacked jurisdiction. The Supreme Court affirmed. For purposes of diversity jurisdiction, Americold’s citizenship is based on the citizenship of its members, which include its shareholders. Historically, the relevant citizens for jurisdictional purposes in a suit involving a “mere legal entity” were that entity’s “members,” or the “real persons who come into court” in the entity’s name. Except for that limited exception of jurisdictional citizenship for corporations, diversity jurisdiction in a suit by or against the entity depends on the citizenship of all its members, including shareholders. The Court rejected an argument that anything called a “trust” possesses the citizenship of its trustees alone; Americold confused the traditional trust with the variety of unincorporated entities that many states have given the “trust” label. Under Maryland law, the real estate investment trust at issue is treated as a “separate legal entity” that can sue or be sued. View "Americold Realty Trust v. ConAgra Foods, Inc." on Justia Law

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POM, which produces and sells a pomegranate-blueberry juice blend, filed a Lanham Act suit (15 U.S.C. 1125) against Coca-Cola, alleging that the name, label, marketing, and advertising of a Coca-Cola juice blend mislead consumers into believing the product consists predominantly of pomegranate and blueberry juice when it actually consists of less expensive apple and grape juices, and that the confusion causes POM to lose sales. The district court granted Coca-Cola partial summary judgment, ruling that the Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. 321(f), 331, and its regulations preclude Lanham Act challenges to the name and label of the juice blend. The Ninth Circuit affirmed. The Supreme Court reversed, holding that competitors may bring Lanham Act claims challenging food and beverage labels regulated by the FDCA. The Court noted that the issue was preclusion, not pre-emption. Even if the Court’s task is to reconcile or harmonize the statutes instead of to determine whether one is an implied repeal in part of another, the best way to do that does not require barring POM’s Lanham Act claim. Neither the Lanham Act nor the FDCA expressly forbids or limits Lanham Act claims challenging labels that are regulated by the FDCA. The laws complement each other in major respects: both touch on food and beverage labeling, but the Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety. The FDCA’s enforcement is largely committed to the FDA, while the Lanham Act allows private parties to sue competitors to protect their interests on a case-by¬case basis. Allowing Lanham Act suits takes advantage of synergies among multiple methods of regulation. Because the FDA does not necessarily pursue enforcement measures regarding all objectionable labels, preclusion of Lanham Act claims could leave commercial interests, and indirectly the general public, with less effective protection in the food and beverage labeling realm than in other less regulated industries. Neither the statutory structure nor the empirical evidence indicates there will be any difficulty in fully enforcing each statute. View "POM Wonderful LLC v. Coca-Cola Co." on Justia Law

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Lexmark sells the only type of toner cartridges that work with its laser printers; remanufacturers acquire and refurbish used Lexmark cartridges to sell in competition with Lexmark’s new and refurbished cartridges. Lexmark’s “Prebate” program gives customers a discount on new cartridges if they agree to return empty cartridges to the company. Every Prebate cartridge has a microchip that disables the empty cartridge unless Lexmark replaces the chip. Static Control makes and sells components for cartridge remanufacture and developed a microchip that mimicked Lexmark’s. Lexmark sued for copyright infringement. Static Control counterclaimed that Lexmark engaged in false or misleading advertising under the Lanham Act, 15 U.S.C. 1125(a), and caused Static Control lost sales and damage to its business reputation. The district court held that Static Control lacked “prudential standing,” applying a multifactor balancing test. The Sixth Circuit reversed, applying a “reasonable interest” test. A unanimous Supreme Court affirmed. The Court stated that the issue was not “prudential standing.” Whether a plaintiff comes within a statute’s zone of interests requires traditional statutory interpretation. The Lanham Act includes in its statement of purposes, “protect[ing] persons engaged in [commerce within the control of Congress] against unfair competition.” “Unfair competition” is concerned with injuries to business reputation and sales. A section 1125(a) plaintiff must show that its injury flows directly from the deception caused by the defendant’s advertising; that occurs when deception causes consumers to withhold trade from the plaintiff. The zone-of-interests test and the proximate-cause requirement identify who may sue under section 1125(a) and provide better guidance than the multi-factor balancing test, the direct-competitor test, or the reasonable-interest test. Static Control comes within the class of plaintiffs authorized to sue under section 1125(a). Its alleged injuries fall within the zone of interests protected by the Act, and it sufficiently alleged that its injuries were proximately caused by Lexmark’s misrepresentations. View "Lexmark Int’l, Inc. v. Static Control Components, Inc." on Justia Law

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POM, which produces and sells a pomegranate-blueberry juice blend, filed a Lanham Act suit (15 U.S.C. 1125) against Coca-Cola, alleging that the name, label, marketing, and advertising of a Coca-Cola juice blend mislead consumers into believing the product consists predominantly of pomegranate and blueberry juice when it actually consists of less expensive apple and grape juices, and that the confusion causes POM to lose sales. The district court granted Coca-Cola partial summary judgment, ruling that the Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. 321(f), 331, and its regulations preclude Lanham Act challenges to the name and label of the juice blend. The Ninth Circuit affirmed. The Supreme Court reversed, holding that competitors may bring Lanham Act claims challenging food and beverage labels regulated by the FDCA. The Court noted that the issue was preclusion, not pre-emption. Even if the Court’s task is to reconcile or harmonize the statutes instead of to determine whether one is an implied repeal in part of another, the best way to do that does not require barring POM’s Lanham Act claim. Neither the Lanham Act nor the FDCA expressly forbids or limits Lanham Act claims challenging labels that are regulated by the FDCA. The laws complement each other in major respects: both touch on food and beverage labeling, but the Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety. The FDCA’s enforcement is largely committed to the FDA, while the Lanham Act allows private parties to sue competitors to protect their interests on a case-by¬case basis. Allowing Lanham Act suits takes advantage of synergies among multiple methods of regulation. Because the FDA does not necessarily pursue enforcement measures regarding all objectionable labels, preclusion of Lanham Act claims could leave commercial interests, and indirectly the general public, with less effective protection in the food and beverage labeling realm than in other less regulated industries. Neither the statutory structure nor the empirical evidence indicates there will be any difficulty in fully enforcing each statute. View "POM Wonderful LLC v. Coca-Cola Co." on Justia Law

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Lexmark sells the only type of toner cartridges that work with its laser printers; remanufacturers acquire and refurbish used Lexmark cartridges to sell in competition with Lexmark’s new and refurbished cartridges. Lexmark’s “Prebate” program gives customers a discount on new cartridges if they agree to return empty cartridges to the company. Every Prebate cartridge has a microchip that disables the empty cartridge unless Lexmark replaces the chip. Static Control makes and sells components for cartridge remanufacture and developed a microchip that mimicked Lexmark’s. Lexmark sued for copyright infringement. Static Control counterclaimed that Lexmark engaged in false or misleading advertising under the Lanham Act, 15 U.S.C. 1125(a), and caused Static Control lost sales and damage to its business reputation. The district court held that Static Control lacked “prudential standing,” applying a multifactor balancing test. The Sixth Circuit reversed, applying a “reasonable interest” test. A unanimous Supreme Court affirmed. The Court stated that the issue was not “prudential standing.” Whether a plaintiff comes within a statute’s zone of interests requires traditional statutory interpretation. The Lanham Act includes in its statement of purposes, “protect[ing] persons engaged in [commerce within the control of Congress] against unfair competition.” “Unfair competition” is concerned with injuries to business reputation and sales. A section 1125(a) plaintiff must show that its injury flows directly from the deception caused by the defendant’s advertising; that occurs when deception causes consumers to withhold trade from the plaintiff. The zone-of-interests test and the proximate-cause requirement identify who may sue under section 1125(a) and provide better guidance than the multi-factor balancing test, the direct-competitor test, or the reasonable-interest test. Static Control comes within the class of plaintiffs authorized to sue under section 1125(a). Its alleged injuries fall within the zone of interests protected by the Act, and it sufficiently alleged that its injuries were proximately caused by Lexmark’s misrepresentations. View "Lexmark Int'l, Inc. v. Static Control Components, Inc." on Justia Law

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The Federal Aviation Administration Authorization Act (FAAAA) preempts state laws “related to a price, route, or service of any motor carrier ... with respect to the transportation of property.” 49 U. S. C. 14501(c)(1). Pelkey sued in New Hampshire state court, alleging that Dan’s towing company towed his car from a parking lot without Pelkey’s knowledge, failed to notify him of its plan to auction the car, held an auction despite Pelkey’s notice that he wanted to reclaim the car, and traded the car away without compensating Pelkey. Pelkey alleged Dan’s did not meet the requirements of New Hampshire statutes, chapter 262, which regulates disposal of abandoned vehicles by a “storage company;” violated New Hampshire’s Consumer Protection Act; and violated its duties as a bailee The court granted Dan’s summary judgment, concluding that the FAAAA preempted Pelkey’s claims. The New Hampshire Supreme Court reversed, finding FAAAA preemption inapplicable to claims related to conduct in post-storage disposal, as opposed to conduct concerning “transportation of property,” or a “service.” The Supreme Court affirmed. Section 14501(c)(1) does not preempt state-law claims stemming from the storage and disposal of a towed vehicle. Pelkey’s claims are not related to “transportation of property” nor the “service” of a motor carrier. The words “with respect to the transportation of property” limit the FAAAA’s preemptive scope. Transportation of Pelkey’s car from his landlord’s parking lot was a service that ended months before the conduct on which Pelkey’s claims are based. The New Hampshire prescriptions Pelkey invokes hardly constrain participation in interstate commerce by requiring a motor carrier to offer services not available in the market. Nor do they “freez[e] into place services that carriers might prefer to discontinue in the future.” View "Dan's City Used Cars, Inc. v. Pelkey" on Justia Law

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Nike alleged that Already’s athletic shoes violated Nike’s Air Force 1 trademark; Already challenged the trademark. While the suit was pending, Nike agreed not to raise any trademark or unfair competition claims against Already or any affiliated entity based on Already’s existing footwear designs, or any future designs that constituted a “colorable imitation” of Already’s current products. Nike moved to dismiss its claims with prejudice and to dismiss Already’s counterclaim without prejudice. Already opposed dismissal of its counterclaim, indicating that Already planned to introduce new versions of its lines, that potential investors would not consider investing until Nike’s trademark was invalidated, and that Nike had intimidated retailers into refusing to carry Already’s shoes. The district court dismissed. The Second Circuit affirmed. The Supreme Court affirmed, finding the case moot. The breadth of the covenant suffices to meet the burden imposed by the “voluntary cessation doctrine.” The covenant is unconditional and irrevocable. Already did not establish that it engages in or has concrete plans to engage in activities that would arguably infringe Nike’s trademark yet not be covered by the covenant. The fact that some individuals may base decisions on hypothetical speculation does not give rise to the sort of injury necessary to establish standing. The Court rejected the “sweeping argument” that, as one of Nike’s competitors, Already inherently has standing because no covenant can eradicate the effects of a registered but invalid trademark. View "Already, LLC v. Nike, Inc." on Justia Law