Arkansas Business Litigation Lawyer & Attorney : Allen Law Firm : Serving Little Rock, Fort Smith, North Little Rock

The Arkansas Supreme Court affirmed summary judgment in Gallas v. Alexander, No. 06-956 (9/27/07).

The law at issue is codified at A.C.A. § 23-113-101, et seq. This law sets forth procedures for permitting gambling on electronic games of skill. Any city or county that already has horse racing or greyhound racing can hold a local election. Presently only Oaklawn Jockey Club in Hot Springs and Southland Racing Corporation in West Memphis have such legal operations in Arkansas. The racetrack itself chooses whether the election is submitted to the city or county, but the racetrack must pay all expenses associated with the election. The Arkansas Racing Commission (ARC) determines what games qualify as electronic games of skill.  

Plaintiffs are residents of Garland County but not of the city of Hot Springs. They challenged the law on three main grounds: (1) delegation of legislative authority to the racetracks; (2) delegation of legislative authority to the ARC; and (3) the law had no rational basis. The trial court  rejected these arguments and held the law is constitutional. The supreme court agreed and affirmed.

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Lewis & Clark Outfitters filed a trademark infringement action against L.C. Industries (Case No. 07-, Western District of Arkansas, filed 9/26/07). The Complaint alleges that L.C. Industries has infringed Lewis & Clark's numerous trademark registrations and fraudulently obtained registrations for "Lewis N. Clark" from the USPTO. The Complaint also states that the companies communicated with each other in 2000 about trademark issues, but L.C. Industries recently threatened to file a lawsuit against Lewis & Clark.

This case could have an interesting twist. Earlier this year, Lewis & Clark filed a trademark infringement action against Mahco, Inc. (previously posted 5/1/07) L.C. Industries also filed a trademark infringement lawsuit against Mahco in the Northern District of Illinois (filed 2/5/07, see Justia docket summary here).  

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The Southeast Texas Record notes an appeal (either an interlocutory appeal or a request for extraordinary writ relief) in Chivers v. State Farm, one of the many nationwide class actions simmering in the Texarkana, Arkansas-based state courts.

Chivers is a case against several major insurers over the way the insurers compensate  contractors:

The lawsuit involves allegations that after a loss or damage to an insured's property, insurance companies did not disclose or pay the general contractors' overhead and profit. Although the insurance companies paid the claims to the insurers, the plaintiffs state they are entitled to the additional money. The complaint states that general contractors' overhead and profit is 20 percent of an estimated construction job cost and is a paid-for-benefit to the customer.

The issue in the appeal is Circuit Judge Kirk Johnson's order that one of the defendants, Foremost Insurance, produce discovery at a cost of $45 million.

Judge Johnson's disagreed with Foremost's cost estimate in his order and stated that non-lawyer clerks could be employed to search the discovery for privileged material:

After Judge Johnson analyzed the costs of production of Foremost's claim files, he believes 90 percent of the costs are for attorneys' fees for removing attorney-client work product, which "can be identified by company clerks for attorney review at a greatly reduced rate of pay."

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The Arkansas Court of Appeals affirmed judgment for property sellers in Burgess v. French, No. 06-1394 (9/26/07).

Burgess purchased a house from the Frenches. The house was in need of major repair; only one room was completed. Wiring and insulation were exposed throughout the house. The Seller Property Disclosure Form stated that the Frenches had not had any problems with the house. Burgess's agent had seen a puddle of water in the house and encouraged him to get a professional inspection. Burgess refused because he conducted inspections for a living.

The sales contract contained a "disclaimer of reliance" clause that he had inspected the property to his satisfaction and was not relying on the Frenches. The contract also stated that Burgess purchased the house "as is." A week after the sale, Burgess had problems with the roof and electrical system. He called Mrs. French, and she admitted that Mr. French had recently made repairs to the roof. Burgess sued for fraud and constructive fraud.

In affirming judgment for the sellers, the court held it was unreasonable for Burgess to claim reliance. Aside from the disclaimer and "as is" clauses, he had an obligation to make further inquiry when he saw the exposed wiring and was told about the puddle of water.

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The Western District of Arkansas granted summary judgment in Wilkins v. U.S. Bank, N.A., 2007 WL 2750689 (W.D. Ark. 9/19/07).

In 1974, Wilkins purchased a trunk at an estate sale. When he opened the trunk, he found bearer bonds with a face value of nearly $400,000. The bonds were secured by a mortgage and deed of trust which, because of various mergers throughout the years, eventually became the responsibility of U.S. Bank. The trust assets were liquidated in a bankruptcy proceeding in 1941. Wilkins brought various causes of action that U.S. Bank and its predecessors should have preserved the trust assets.

The court's opinion turned on Wilkins' actions. After discovering the bonds in 1974, he first contacted U.S. Bank's predecessor in 1984. He called them a few times a year for 5 years. Then he filed this action in 2003. The court found that Wilkins could not maintain any of his causes of action and granted summary judgment to U.S. Bank.

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The Eastern District of Arkansas issued two decisions in a construction case involving work at Arkansas State University.  Building Construction Enterprises, Inc. v. Meadows. BCE claims certain work was part of the contract; Meadows claims this work was not part of the contract.

Meadows submitted untimely discovery requests to BCE on June 26, 2007. BCE responded with blanket objections and claimed it did not have sufficient knowledge to admit or deny the requests for admission. Frustrated with both parties, the court ordered BCE to provide 125,000 pages of documents and to make a reasonable investigation into the matters addressed in the requests for admission. The court will decide later if the requests for admission should be deemed admitted. See 2007 WL 2570514 (E.D. Ark. 8/31/07).

BCE filed two motions in limine to exclude (1) parole evidence regarding the contract; and
(2) statements by BCE's on-site superintendents. The court denied both motions, finding the contract is ambiguous and that statements by BCE's superintendents are admissions of BCE. See 2007 WL 2695493 (E.D. Ark. 9/10/07).

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The Western District of Arkansas granted a motion to dismiss in McAdams v. McCord, 2007 WL 2461966 (W.D. Ark. 8/28/07).

McAdams and others filed suit against various directors and officers of UCAP, a mortgage lender and brokerage company, including Moore Stephens Frost.  Plaintiffs claimed a conspiracy to defraud them of $10 million. The court dismissed much of the complaint in a prior order. McAdams v. McCord, 2007 WL 951829 (W.D. Ark. 3/27/07).

Plaintiffs filed an amended complaint seeking to meet the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA). Although the amended complaint ballooned to 225 pages, the court found that the amended complaint failed to sufficiently state a claim under the PSLRA. The court dismissed the amended complaint except for a claim for breach of fiduciary duty against one of the individual directors.

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The Eastern District of Arkansas granted a motion to dismiss based on res judicata in B & B Hardware, Inc. v. Hargis Industries, Inc., 2007 WL 2711647 (E.D. Ark. 9/13/07).

The parties have a long and unique history that is important to understand the case. B&B Hardware sells  a variety of fasteners in various industries under the mark "Sealtight." Hargis sells fasteners exclusively used for portable buildings under the trademark "Sealtite." B & B received a federal trademark registration, and the parties engaged in lengthy TTAB proceedings when Hargis tried to register its mark. In 1997, B & B filed suit for trademark infringement.

The jury returned a verdict for Hargis, finding that Sealtight was merely descriptive, and that judgment was affirmed in B & B Hardware, Inc. v. Hargis Industries, Inc., 252 F.3d 1010 (8th Cir. 2001). Hargis did not petition to cancel "Sealtight." In 2006, "Sealtight" became incontestable, which eliminated the merely descriptive defense. B & B filed the instant action, and Hargis moved to dismiss on grounds of res judicata.

The court agreed with Hargis that incontestability alone does not create an exception to res judicata. The court held that while incontestability affects a trademark's validity, it has no bearing on a trademark's strength, and that the only recognized exception to res judicata for trademark infringement is a significant increase in strength over a significant amount of time. See Test Masters Educational Services v. Singh, 428 F.3d 559 (5th Cir. 2005). B & B failed to establish either of these two factors, and the court dismissed the complaint.  

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The Arkansas Supreme Court issued a reminder yesterday to appellate advocates--follow Judge Crabtree's advice and "[i]f you argue it, abstract it." Terry Crabtree, Abstracting the Record, 21 U. Ark. Little Rock 1, 10 (1998).

LandsnPulaski, LLC v. Arkansas State Dept. of Correction, No. 06-1334, is an appeal from a grant of judgment on the pleadings. Rylwell, Inc. and Pulaski Lands, LLC v. Arkansas Development and Finance Authority, No. 07-334, is an appeal from a grant of summary judgment. City of Dardenelle, Arkansas v. City of Russellville, et al., No. 07-195, is an appeal from a grant of a motion to dismiss.

The Arkansas Supreme Court ordered rebriefing in each case for failure to abstract the relevant hearings. LandsnPulaski included a "summary" of the arguments in the abstract instead of the first-person rendering of testimony and argument called for by the rule, while Rylwell and Dardenelle placed transcripts of the relevant hearings in their respective addendums.

We have noted before the "Hobson's Choice" presented by Rule 4-2(a)(5): "If the appellant's attorney omits something from the abstract, the appellate court will not reach the issue," the result being an inefficient "tendency . . . for the attorney to abstract virtually everything in the record, even material of marginal relevance to the issues on appeal." John J. Watkins & Price Marshall, A Modest Proposal: Simplify Arkansas Appellate Procedure by Abolishing the Abstracting Requirement, 53 Ark. L. Rev. 37, 45-46 (2000). 

These cases don't present that dilemma, however. The portion of the transcript containing the hearing where the court granted dispositive relief is obviously a "material part[] of the testimony of the witnesses and colloquies between the court and counsel and other parties as [is]  necessary to an understanding of all questions presented to the Court for decision," Ark. Sup. Ct. R. 4-2(a)(5), and therefore must be abstracted.

The Court has made clear several times that including a transcript of a hearing in the addendum does not comply with the rule. See  Hanners v. Giant Oil Co. of Arkansas, 369 Ark. 226 (2007) (transcript of summary judgment hearing should have been abstracted rather than included in the addendum); Calaway v. Dickson, 360 Ark. 463, 201 S.W.3d 931 (2005) (same with respect to transcript of Rule 11 hearing). Preparing a summary of the argument apparently does not suffice any more than including a transcript of the arguments in the Addendum would.

In other words: "If you argue it, abstract it." Substitute measures, however reasonable, won't do.

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The Northern District of Iowa issued Rule 11 sanctions in Ideal Instruments, Inc. v. Rivard Instruments, Inc., 2007 WL 2710846 (N.D. Iowa 9/19/07). The court's decision to impose sanctions was previously posted 7/10/07. The court imposed sanctions of $50,000 in attorney's fees and $12,937.56 in expenses, to be paid jointly by Rivard Instruments and its counsel. Plaintiffs asked for a total of $180,893 in attorney's fees and expenses.

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The Arkansas Court of Appeals affirmed a refusal to confirm arbitration award in MBNA America Bank, N.A. v. Blanks, No. 06-1396 (9/19/07).

MBNA unilaterally attempted to amend Blanks' credit card agreement by adding an arbitration amendment, but Blanks never signed a contract agreed to arbitration. Then MBNA procured an arbitration award without Blanks' participation in the arbitration. The facts were similar to an earlier MBNA America case, Danner v. MBNA America, N.A. (previously posted 4/27/07).

The trial court refused to confirm the award but gave no grounds (Danner had not yet been decided). The court of appeals applied Danner and affirmed the denial of confirmation because MBNA America could not produce a written agreement authorizing arbitration.

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The Northern District of Iowa denied a motion for temporary restraining order but will schedule a hearing on the motion for preliminary injunction in FastServers, Inc. v. TLDS, LLC, 2007 WL 2611820 (N.D. Iowa 9/6/07).

FastServers claims that TLDS took an internal passwords database, which contained client information, from their internal computer network. TLDS then posted some of this information on its website. FastServers moved for a temporary restraining order based on trade secret misappropriation and interference with business relationships. 

Rule 65 requires that a motion for TRO must be supported by an affidavit or verified complaint, which FastServers failed to do. The court denied the motion for TRO but will set the matter for a hearing on the motion for preliminary injunction.

FastServers also failed to assert a claim for violation of the Computer Fraud & Abuse Act, even though it alleges the information was taken directly from its internal computer network. It will be interesting to see if this claim gets added.  

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The Western District of Missouri dismissed a copyright infringement claim in Scarborough v. Johnson, 2007 WL 2609815 (W.D. Mo. 9/5/07). It is well settled that the plaintiff must file the application for copyright before bringing a copyright infringement lawsuit. Scarborough never filed his application for copyright, and the court easily dismissed the claim.

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The District Court of South Dakota granted a temporary restraining order based on trade secret misappropriation in Poet Plant Management, LLC v. Simpson, 2007 WL 2493514 (D.S.D. 8/29/07).

The opinion is brief, but Simpson is a former employee of Poet Plant Management (PPM). He is currently employed by Ethanex. PPM claimed Simpson would intentionally or unintentionally disclose its trade secrets and confidential information to Ethanex, which would cause irreparable harm to PPM.

The district court granted the temporary restraining order, requiring a $20,000 bond by PPM. A hearing on the preliminary/permanent injunction is scheduled for September 25, 2007, and the court has expedited discovery to accommodate the hearing.

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The Arkansas Supreme Court reversed the setting aside of an easement in Sluyter v. Hale Fireworks Partnership, No. 06-1442 (9/13/07).

The Sluyters and Hale Fireworks Partnership ("HFP") own adjacent tracts of land. In 1991, the previous owners granted reciprocal easements that run with the land. The facts as stated in the case are unclear, but the Arkansas Highway Department widened the nearby highway. This somehow interfered with HFP's use of its easement but did not interfere with the Sluyters' use of their easement.

HFP filed suit to cancel the easement. The trial court applied the contract theory of frustration of purpose, finding that the essential purpose of the easement was frustrated. The supreme court disagreed because the language of the easement never contemplates termination of the easement. The parties intended the easements to be binding, not to be destroyed when one party was inconvenienced or even lost the use of its easement altogether.

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The Arkansas Court of Appeals affirmed an order denying a motion to compel arbitration in Richard Harp Homes, Inc. v. Van Wyk, No. 06-1446 (9/12/07).

The Van Wyks hired Harp to build a home. The parties' contract had a lengthy arbitration provision that purported to submit all claims to arbitration. However, later provisions in the contract discussed rights of the parties in the event of a breach, which included "court costs and expenses of litigation." The Van Wyks were sued by neighbors, and they filed a cross claim against Harp. Harp moved to compel arbitration.

The trial court ruled that the mutuality of obligation in the arbitration clause was rendered illusory when the contract was read as a whole. The court of appeals agreed and commented on the contractual language discussing litigation remedies: "While this language does not specifically reserve Harp's right to litigate any or all disputes, it does render the agreement ambiguous so that the trial court can construe the agreement."

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Judge Hendren refused to decide a discovery dispute in Rotoworks Int'l Ltd. v. Grassworks USA, LLC, 2007 WL 2582190 (W.D. Ark. 9/4/07) (last posted here 9/6/07). After an award of sanctions was entered, the case has continued its downward spiral, with the exasperation evident in the tone of the court's opinion:

The Court has read the submissions of the parties, which amount to literally hundreds of pages, much of it devoted to bickering about who has done what to whom, or failed to do it, or might do it in the future. None of this is particularly helpful to the Court in trying to resolve whether there is some discoverable piece of information about which plaintiff has inquired, and about which one or more defendants has failed to permit discovery. Nor does it advance the preparation of this case for trial; in the Court's view, the case is being delayed by the acrimonious turn discovery has taken.

The Court declines to sort through the masses of material submitted to it in connection with the pending motions and try to separate the legitimate issues from the bickering of the parties. It is the responsibility of the parties to present a concise motion to the Court setting forth matters that are really, truly, in dispute.

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The District Court of Minnesota granted summary judgment on a number of claims in Gregerson v. Vilana Financial, Inc., 2007 WL 2509718 (D. Minn. 8/31/07) (previously posted 1/31/07).

Vilana copied two of Gregerson's photographs in various advertisements. Gregerson created websites where he discussed Vilana's copying of the photographs and made unflattering statements about Vilana. Gregerson filed suit for copyright infringement, while Vilana filed a counterclaim for trademark infringement, cybersquatting, deceptive trade practices, and other claims.

The court easily granted summary judgment on the copyright claim. A comparison of the photographs showed they were identical. The court also granted summary judgment against the trademark and cybersquatting counterclaims, finding that Gregerson just made a descriptive use of Vilana's trademarks in his metatags.

However, the court refused to grant summary judgment on the deceptive trade practices and related claims. There was evidence in the record that Gregerson made statements that Vilana is a thief, actively engaged in predatory lending, and a member of the Russian mafia. These issues and the damages on the copyright claim must be resolved at trial.

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The District Court of Minnesota dismissed trade secret claims and refused to permit amended pleading to add a computer fraud claim in Boston Scientific, Inc. v. Ev3, Inc., 2007 WL 2493117 (D. Minn. 8/29/07).

Boston Scientific originally filed a patent infringement claim against Ev3. Discovery revealed that Ev3 obtained trade secret documents related to the patent at issue, and Boston Scientific was permitted to amend the complaint to add a claim for trade secret misappropriation. The trade secret claim later expanded to include numerous documents unrelated to the patent claim. Ev3 moved to dismiss the trade secret claim for lack of supplemental jurisdiction.

The court held that when the trade secret claim added issues beyond the patent claim, it ceased to have a common nucleus of operative facts with the patent claim. The court dismissed the trade secret claim for lack of supplemental jurisdiction.

Boston Scientific also asked the court for leave to amend the trade secret claim as a violation of the Computer Fraud and Abuse Act. The court declined this request because the request did not meet the formal procedure required by the court, and the deadline for amending pleadings had already passed.

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A corrective order was entered in MTS Systems Corp. v. Hysitron, Inc. (previously posted 8/6/07). The earlier opinion incorrectly stated that Hysitron failed to provide its own claim chart. Hysitron did provide its claim chart in accordance with the pretrial order. The court entered a corrective order removing the statement about Hysitron's claim chart from the opinion.

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Arkansas corporations cannot represent themselves pro se, as Smithco Investments of West Memphis, Inc., et al. v. Morgan Keegan & Co., Inc.., reaffirms in the context of dismissing an appeal.

Smithco Investments filed a notice of appeal within the 30-day limit, but "the notice of appeal was not signed by an attorney, but rather it was signed by Smithco’s CEO . . . ."The Arkansas Supreme Court held that the notice was a nullity; this effectively waived the appeal because the 30-day limit had long since passed.

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Two important orders were entered in the Arkansas trademark case Rotoworks Int'l Ltd. v. Grassworks USA, LLC, No. 07-5009 (W.D. Ark.) (previously posted here 4/19/07 and here 3/27/07). The Court granted partial summary judgment on Rotoworks' cybersquatting claims. (See order here). Grassworks must transfer the domain name www.rotowiper.com to Rotoworks by September 11, 2007.

The Court also granted Rotoworks' motion for sanctions. In a lengthy opinion (here) the Court found that Grassworks had no basis for filing its counterclaim. Moreover, the opinion highlights misconduct by Grassworks' attorney. The attorney continued to claim information was confidential despite numerous rulings to the contrary. The attorney even attempted to designate depositions as confidential, threatening to take action Rotoworks once Grassworks appealed the rulings.

The Court was clearly frustrated with Grassworks' and its attorney's conduct. The Court ordered Grassworks to pay Rotoworks' attorney's fees and expenses associated with the counterclaim and the motion for sanctions. The Court also assessed a sanction of $1,000 against Grassworks' attorney.

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The Eighth Circuit affirmed a motion to dismiss and motion for summary judgment in 168th and Dodge, L.P. v. Rave Reviews Cinemas, LLC, No. 06-3063 (8/31/07).

Plaintiffs purchased a plat in Omaha, Nebraska, to develop as a shopping center. Rave Cinemas approached them about building a theater complex in the center. The parties negotiated extensively and signed a letter of intent. Plaintiffs incurred additional expenses of nearly $600,000 to acquire more land, and a Rave official said the project was a "done deal." Rave backed out of the deal, and Plaintiffs brought this lawsuit for breach of contract, breach of implied contract and promissory estoppel.

The district court dismissed the breach of contract claim and later granted summary judgment on the other two claims. The Eighth Circuit affirmed and cautioned against this scenario where the losing party in a deal tries to give legal effect to a preliminary document. The letter of intent plainly states it is not a binding contract, and the court found that Plaintiffs could not have reasonably relied on representations that the matter was a done deal.

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