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When a business is unsatisfied with the services it is receiving under a contract, it can sometimes be tempting to stop paying for those services and end the relationship immediately. Most written contracts, however, have some provision for how the termination of the contract must be addressed. Often, contracts require that the other party be given a chance to cure any problems before the contract can be properly terminated. A business that tries to end a relationship without properly terminating the agreement pursuant to its terms may be in breach of the contract.

file5351249500306.jpgThe termination of a contract was at issue in motions for summary judgment in the case of Big E Trailers, Inc., v. The Ohio Andersons, Inc. In 2011, the plaintiff and the defendant entered into a four-year contract for the plaintiff to provide maintenance of the defendant’s trailers for a flat rate of $325 per month for each trailer in the fleet. The parties had a previous agreement that required the plaintiff to replace some of the plastic tanks with fiberglass tanks, but that requirement was not in the 2011 contract. There was evidence that the plaintiff installed some fiberglass tanks after the end of the previous agreement.

In 2014, the defendant notified the plaintiff that it was terminating the contract. The plaintiff filed suit several months later, alleging the defendant had not properly terminated the agreement and had breached it by not making monthly payments. The defendant counterclaimed, alleging the plaintiff had failed to perform tasks under the agreement. Both parties sought summary judgment.
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file0001387625417.jpgThe False Claims Act prohibits government contractors from fraudulently seeking payment from the federal government. A complaint alleging a claim under 31 U.S.C §(a)(1)(A) must allege that the defendant presented or caused to be presented a false or fraudulent claim that it knew was false to seek payment from the federal treasury. Under 31 U.S.C. § 3729(a)(1)(B), a complaint must allege that the defendant made or caused to be made a statement that was material to a false or fraudulent claim and that it knew the statement was false. Section 3729(a)(1)(G) is a reverse false claim, relating to a situation in which the defendant uses a false statement to avoid paying the government. In a reverse false claim, the defendant must knowingly use a material false statement to avoid or decrease an obligation to pay the government.

The District Court for the Western District of New York recently considered whether the complaint in a False Claims Act case involving a trucking company with a contract to transport mail for the United States Postal Service (“USPS”) was sufficiently pled to get past the defendant’s motion to dismiss.

The relator in U.S. ex rel. Davern v. Hoovestol, Inc., had been a truck driver for the defendant. He alleged there was a series of contracts between the defendant and USPS for the transportation of mail from Rochester, New York, and Springfield, Massachusetts. The defendant submitted PS Form 7463A, which contained columns related to costs associated with transportation contracts. The costs included fuel, tolls, and straight time. The court noted that it was a reasonable inference that the contractor was required to list the specific costs for the categories listed on the form.
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file0001116876406.jpgA business will only be liable for the actions of an individual if that individual has some type of authority to bind the business, whether actual, apparent, or implied. A business should always know with whom they are dealing and should ensure that any written agreement clearly identifies the parties to be bound.

The Eleventh Circuit recently considered the issue of apparent authority in the unpublished case of Doug’s Coin & Jewelry, Inc. v. Americas Value Channel, Inc. d.b.a. AVC. The case arose from transactions in which a man obtained coins to market on television but never paid for them. The companies who provided the coins sued both the man and the television station. The companies ultimately won a default judgment against the man for breach of contract and conversion. The district court, however, did not hold the television station liable, finding that the man was not acting as its agent when he obtained the coins.

The plaintiffs appealed, arguing that the district court had not considered whether he had acted with the implied authority of the television station. That issue had not been raised below, however, so the circuit court would not consider it. The circuit court pointed out that implied authority is not the same as apparent authority, and the fact the plaintiffs had raised the issue of apparent authority did not preserve the issue of implied authority. Implied authority is the authority that the principal actually meant for the agent to have and is shown through the conduct and dealings between the principal and the agent. The circuit court found no error in the trial court’s failure to consider the implied authority argument when it had not been presented.
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file4821256587748 (2).jpgBusinesses regularly include arbitration provisions in contracts. Arbitration can be useful to resolve disputes while keeping costs down, but businesses should understand the implications of agreeing to arbitration. Arbitration awards generally cannot be appealed. Although a court can vacate an arbitration award, it may do so only under limited circumstances. A business should therefore take arbitration as seriously as it would take litigation. Furthermore, the risk in failing to follow the contractual requirements related to dispute resolution and the procedural requirements of the arbitration are significant.

The Eleventh Circuit recently considered a request to vacate an arbitration award when the plaintiffs had not even participated in the arbitration hearing. The parties in Johnson v. Directory Assistants, Inc., entered into a contract for the defendant to manage the plaintiff company’s advertising activity. The agreement was signed by the plaintiff company’s administrator, who was also a plaintiff in his individual capacity. He wrote a company name on the contract that is not a registered entity in Alabama, but he asserted that he signed on behalf of the plaintiff company and shortened the name for purposes of space. The agreement contained a provision stating that the parties agreed to resolve disputes arising out of or relating to the contract through binding arbitration. The provision required the parties to “try to mutually choose the arbitration service, the location, and which state’s law will govern.” In the event the parties could not mutually agree, the filing party could choose unilaterally after making a good-faith effort to reach an agreement.

The plaintiffs alleged that they had communicated dissatisfaction with the services, but the defendant failed to resolve the issue. The plaintiffs stopped paying the defendants during the contract’s second year.
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wood-2-1179567-640x480.jpgIt is easy to understand how books and paintings can receive copyright protection. Many people do not realize that copyright goes beyond traditional forms of art and can be applied to designs in a variety of situations, if the design can be separated from the useful article. This means that copyright can sometimes protect businesses from competitors who copy their ideas.

The Eleventh Circuit recently considered whether a design for laminate flooring could be protected by copyright in Home Legend, LLC v. Mannington Mills, Inc. Both parties to the case sell laminate flooring. Laminate flooring includes a decorative layer. The question before the court was whether a design for that “décor paper” can be copyrighted.

Mannington created a design called “Glazed Maple.” The design is a large photograph of 15 stained maple planks that appear worn. To create the design, Mannington employees started with 50 to 75 raw white maple planks. They then added a variety of surface imperfections to make the boards appear aged and worn. They then applied stain to the planks, allowing it to pool in some areas and making it darker and heavier at the edges. They used multiple colors of stain and created a variety of effects with stain and paint. They then selected approximately 30 planks and photographed them. They then digitally altered and retouched the photos. They then selected images of 15 planks and made a composite of them to create a single image. Mannington registered the copyright for the design in 2010. In September 2012, Mannington learned that Home Legend was selling flooring with designs it claimed were “virtually identical” to Mannington’s Glazed Maple.
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factory5.jpgA federal appeals court has affirmed a $6 million judgment, including $5 million in punitive damages, against a product testing company that committed negligent misrepresentation.

According to court records in Brand Mktg. Grp. LLC v. Intertek Testing Servs. NA, the testing firm promised that it could conduct tests of a new product to make sure it met all applicable legal safety standards in order to be sold to the U.S. public. But when sales of those items were halted by the distributor, who learned the product did not meet those safety standards, the distributor sued the manufacturer and won a judgment. The manufacturer in turn sued the product testing company.
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stethascope5.jpgThe U.S. Justice Department is considering a settlement offer of nearly $70 million from Broward Health, a taxpayer-funded public hospital, in connection with a federal investigation pertaining to Medicaid and Medicare fraud.

The offer comes after four years of investigation, for which the hospital has already paid more than $10 million in legal fees.

A False Claims Act filing by an undisclosed whistleblower – known as a qui tam lawsuit – sparked the investigation in 2011. That individual stands to collect up to 25 percent of the $70 million settlement offer if the Justice Department accepts.
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The U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of a qui tam lawsuit by a federal district court after finding, as a matter of first impression, such an action can’t be brought by someone convicted of conduct giving rise to the fraud, even if the role they played was minor.

Qui tam lawsuits allow private citizens to file actions as whistleblowers against corporations or other entities that commit fraud against the government. If they succeed in that action, they are entitled to a portion of the recovery collected by the government as a result.

However, as the case of Schroeder v. U.S. reveals, the person bringing that action can’t have been engaged in that fraud and also collect. According to court records, the plaintiff worked for a company that was contracted with the U.S. Department of Energy. He worked as a Radiological Control Technician from 2002 to 2003, and then again from 2004 through 2008.
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flooding.jpgTwo sisters who alleged an insurance company cheated the federal government by filing false claims following Hurricane Katrina not only had their winning verdict affirmed, but also they were granted permission to expand their claim to include potentially thousands of other cases.

Qui tam lawsuits are a type of civil litigation in which whistleblowers file claims against private corporations (such as insurance companies) under the False Claims Act. This statute allows the whistleblowers to collect a portion of whatever funds are recovered by the government.

In Rigsby v. State Farm Fire & Casualty Co., the claimants alleged a large insurance company swindled the government out of money following a monster storm by classifying damage to certain homes as being from flood, rather than wind. The reason this matters is because reimbursement for flood-damaged homes is paid for by the government through the National Flood Insurance Program, which is issued by the Federal Emergency Management Agency (FEMA). However, reimbursement for homes damaged by wind would come directly from the pockets of the insurance company.
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computermouse1.jpgFor many companies, trade secrets are essential to the business model.

These could come in the form of:

  • A formula
  • A recipe
  • A method
  • A marketing strategy
  • A manufacturing technique
  • A computer algorithm
  • A list of customers

No matter its form, the key is that a trade secret gives the owner a competitive advantage in the market, and it’s treated in a way that prevents either the public or competing firms from finding out about it, unless they do so through theft or other improper acquisition.

If those secrets are stolen or improperly acquired, it can be grounds for civil litigation.

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