Thursday, August 14, 2014
Ind. Decisions - 7th Circuit issues two Indiana opinions today
In Elliott Levin v. William Miller (SD Ind., Barker), a 13-page opinion with a separate concurring opinion, Judge Easterbrook writes:
Irwin Financial Corporation, a holding company, entered bankruptcy when its subsidiar ies failed. Both subsidiaries were banks (Irwin Union Bank & Trust and Irwin Union Bank, FSB), which the Federal Deposit Insurance Corp. closed and took over in 2009. The banks’ asset portfolios had been dominated by mortgage loans, whose value plunged in 2007 and 2008. The FDIC is in the process of collecting the banks’ assets and paying their debts. * * *In Fortres Grand Corporation v. Warner Brothers Entertainment (ND Ind., Simon), a 17-page opinion, Judge Manion writes:
Elliott Levin, Irwin Financial’s trustee in bankruptcy, filed this suit against three of its directors and officers. * * *
All of the litigants agree that the distinction between di rect and derivative claims depends on Indiana law, for Irwin was incorporated there. Indiana treats a stockholder’s claim as derivative if the corporation itself is the loser and the in vestor is worse off because the value of the firm’s stock declines.
[the ILB has hit only a high point or two]
The judgment of the district court is affirmed with re-‐‑ spect to counts 1, 2, 4, and 5. It is vacated with respect to counts 3 and 7. The case is remanded for further proceedings consistent with this opinion.
[J.Hamilton's concurring opinion begins] HAMILTON, Circuit Judge. I join Judge Easterbrook’s opinion for the court. His opinion accurately applies the difference between a shareholder’s direct and derivative claims, which all parties agree is the decisive legal question. Counts three and seven are correctly categorized as direct claims and must be remanded, even though they do not have promising futures because of the Business Judgment Rule.
I have come to that conclusion reluctantly, however. Stepping back from the parties’ arguments, I believe this case raises some broader policy questions that deserve consideration by the FDIC and Congress, including why the direct/ derivative distinction should still matter, either under the current version of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, see 12 U.S.C. § 1821(d)(2)(A), or perhaps other statutory amendments that Congress may want to consider. * * *
Counsel for Irwin Financial’s trustee pointed out in oral argument that the FDIC is supported by insurance premiums collected by covered banks rather than by direct appropriations by Congress. The FDIC asserts, however, that its insurance is backed by the full faith and credit of the United States government, meaning all taxpayers. In light of that public interest and the banks’ ability to socialize the losses they cause, I hope the FDIC and/or the Congress will consider this issue.
Fortres Grand Corporation develops and sells a desktop management program called “Clean Slate.” When Warner Bros. Entertainment used the words “the clean slate” to describe a hacking program in the movie, The Dark Knight Rises, Fortres Grand noticed a precipitous drop in sales of its software. Believing Warner Bros.’ use of the words “clean slate” infringed its trademark and caused the decrease in sales, Fortres Grand brought this suit. Fortres Grand alleged that Warner Bros.’ use of the words “clean slate” could cause consumers to be confused about the source of Warner Bros.’ movie (“traditional confusion”) and to be confused about the source of Fortres Grand’s software (“reverse confusion”). The district court held that Fortres Grand failed to state a claim under either theory, and that Warner Bros.’ use of the words “clean slate” was protected by the First Amendment. Fortres Grand appeals, arguing only its reverse confusion theory, and we affirm without reaching the constitutional question. * * *
Because Fortres Grand has failed to plausibly allege confusion, it has failed to state a claim for trademark infringement under 15 U.S.C. §§ 1114, 1125 and Indiana unfair competition law. Accordingly, the district court did not err by granting Warner Bros.’ motion to dismiss the complaint.
Posted by Marcia Oddi on August 14, 2014 01:09 PM
Posted to Ind Fed D.Ct. Decisions