Justia Business Law Opinion Summaries

The Commissioner disallowed petitioner's claimed deduction on his 1999 tax return for a capital loss purportedly generated by several Cayman Islands entities. Petitioner invested in an Offshore Portfolio Investment Strategy (OPIS) in order to reduce the tax liability associated with petitioner's strategy of either taking his company, DiTech, public or selling it. The Tax Court affirmed. Applying the economic substance doctrine, the court concluded that the record amply supported the Tax Court's factual conclusion that petitioner pursued the OPIS product solely for its tax benefits and that the Tax Court had ample record support for its factual conclusion that the OPIS transaction had no practical economic effects other than the creation of income tax losses. Accordingly, the court affirmed the judgment of the district court. View "Reddam v. CIR" on Justia Law

The FTC filed suit against BurnLounge, a multi-level marketing business, alleging violation of section 5(a) of the Federal Trade Commission Act (FTCA), 15 U.S.C. 45(a)(1). The court agreed with the district court that BurnLounge was an illegal pyramid scheme in violation of the FTCA, in light of Webster v. Omnitron International, Inc., because BurnLounge's focus was recruitment, and because the rewards it paid in the form of cash bonuses were tied to recruitment rather than the sale of merchandise. Further, the district court did not abuse its discretion by admitting the FTC's expert's testimony because it was relevant and reliable. Accordingly, the court affirmed the district court's order granting a permanent injunction against BurnLoundge's continued operation. View "FTC v. BurnLounge, Inc." on Justia Law

This appeal stemmed from the sale of the Chronicle Publishing Company. After the Martin Family Trusts formed a tiered partnership structure, the Martin heirs commenced a series of transactions designed to create losses that would offset the taxable gain realized from the Chronicle Publishing sale. On appeal, taxpayers argued that the 2000-A Final Partnership Administrative Adjustment (FPAA) was time-barred by the restrictive language in the extension agreements. The court agreed with the district court that the extension agreements between the IRS and First Step encompassed adjustments made in the 2000-A FPAA that were directly attributable to partnership flow-through items of First Ship; the FPAA to 2000-A extended the limitations period for assessing tax beyond the extension agreements and through the present litigation; however, the agreements did not extend to adjustments in the 2000-A FPAA that were not directly attributable to First Ship; and because the district court held more broadly that "the extension agreements encompass the adjustments made by the IRS in the FPAA issued to 2000-A," the court remanded to the district court to make a determination of which adjustments in the 2000-A FPAA were directly attributable to partnership flow-through items of First Ship. The court affirmed in part and reversed in part. View "Candyce Martin 1999 Irrevocable Trust v. United States" on Justia Law

Rock River, a producer, seller, and distributor of music records, filed suit against UMG, alleging that UMG inappropriately blocked Rock River from distributing its album of Bob Marley and the Wailers remixes by wrongfully threatening to sue Rock River's distributors. The district court ruled in favor of UMG. The court remanded Rock River's intentional interference with prospective economic advantage (IIPEA) claim for trial where it had not yet been established that Rock River's album violated the exclusive licensing rights of UMG or any other entity, and there remains a triable issue as to whether San Juan Music Group has licensing rights to all of the underlying recordings or whether UMG has the exclusive licensing rights to one or more of the recordings; the court could not affirm the district court's grant of summary judgment to UMG on the alternative basis of Noerr-Pennington immunity because a reasonable jury could conclude that UMG's cease-and-desist communications satisfied both criteria of the sham exception; and the court affirmed the district court's ruling that UMG did not implicitly waive privilege over its attorney-client communications. Accordingly, the court affirmed in part, reversed in part, and remanded. View "Rock River Commc'n v. Universal Music Group" on Justia Law

Fitness Holdings, the debtor in this bankruptcy case, was a home fitness corporation. At issue was whether debtor's pre-bankruptcy transfer of funds to its sole shareholder, in repayment of a purported loan, could be a constructively fraudulent transfer under 11 U.S.C. 548(a)(1)(B). The court held that a court has the authority to determine whether a transaction created a debt if it created a right to payment under state law. Because the district court concluded that it lacked authority to make this determination, the court vacated the decision and remanded for further proceedings. View "In re: Fitness Holdings Int'l" on Justia Law

National Elevator, lead plaintiff on behalf of investors who purchased VeriFone stock, appealed the dismissal of its securities fraud class action. National Elevator alleged that VeriFone, the CEO and former Chairman of the Board of Directors, and the company's former CFO and Executive Vice President, violated sections 10(b), 20(a), and 20A of the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), 78t-1(a), and 78t(a), and Securities and Exchange Commission Rule 10-b, 17 C.F.R. 240.10b-5(b), in connection with a December 2007 restatement of financial results. The court held that National Elevator adequately pleaded violations of section 10B and Rule 10b as to all defendants; its section 20A claim against the individual defendants was sufficiently pled; but the section 20(a) claim was properly dismissed. Accordingly, the court affirmed in part and dismissed in part. View "National Elevator Industry Pension Fund v. VeriFone Holdings, Inc., et al" on Justia Law

CIRI filed suit against defendants, shareholders of CIRI, alleging that they had violated the Alaska Native Claims Settlement Act (ANCSA), 43 U.S.C. 1601-1629(h), and Alaska law. On appeal, defendants challenged the district court's holding that it had subject matter jurisdiction over the ANCSA claims. The court held that there was federal jurisdiction under the general federal question jurisdiction statute, 28 U.S.C. 1331, over plaintiff's ANCSA claims because federal law created the cause of action in the claims and because the claims were not frivolous. Accordingly, the court affirmed the judgment of the district court. View "Cook Inlet Region, Inc. v. Rude, et al." on Justia Law

The IRS issued a Notice of Deficiency (NOD) to Alex and Liset Meruelo a few days before the three-year statute of limitations expired. Alex was a partner in a partnership. The Meruelos petitioned the tax court challenging the deficiency contained in the NOD and subsequently moved to dismiss for lack of jurisdiction on the ground that the IRS issued the NOD prematurely, making it invalid. The tax court held that the NOD was valid and not premature and that the items were affected items. The parties later reached an agreement as to all issues, except the validity of the NOD. The tax court then entered a final decision holding that the Meruelos were liable for $1,387,006 in additional income tax and $277,401 in penalties. The Ninth Circuit Court of Appeals affirmed, holding that (1) a NOD issued when no partnership-level proceeding or final partnership administrative adjustment have been issued is valid; (2) a NOD issued when the normal three-year statute of limitations has not expired is valid; and (3) therefore, the tax court had jurisdiction. View "Meruelo v. Comm'r of Internal Revenue" on Justia Law

The Scotts Company, an Ohio LLC, brought a diversity action against Seeds, Inc., a Washington corporation, in federal district court. Thereafter, Millhorn Farmers, Maple Leaf Farms, Mica Creek, and Tim Freeburg (Growers) sued Seeds and Scotts in Washington state court. Maple Leaf Farms and Mica Creek were Washington corporations, Millhorn Farms was an Idaho corporation, and Tim Freeburg was a citizen of Idaho. Scotts subsequently filed an amended complaint in federal court adding the Growers as defendants and seeking declaratory relief. The district court subsequently realigned the Growers and plaintiffs and Seeds and Scotts as defendants and held, alternatively, that it would stay the federal proceedings in favor of the related state court proceedings under either the Brillhart doctrine or the Colorado River doctrine. Because the parties' realignment resulted in the absence of complete diversity of citizenship between defendant Seeds and newly-aligned plaintiffs-Growers, the district court dismissed the action for lack of subject matter jurisdiction. The Ninth Circuit Court of Appeals reversed, holding that the district court should not have declined to entertain the claim for declaratory relief under the Brillhart doctrine, and instead, the claims should have been evaluated under the Colorado River doctrine. Remanded. View "Scotts Co., LLC v. Seeds, Inc." on Justia Law

This case involved a dispute over the proceeds of a life insurance policy. At issue was whether the federal interpleader remedy shields a negligent stakeholder from tort liability for its creation of a conflict over entitlement to the interpleaded funds. After analyzing the Supreme Court's reasoning in State Farm Fire & Cas. Co. v. Tashire, the Ninth Circuit Court of Appeals held that it did not, and that a claimant may seek to recover all damages directly and proximately caused by the negligent stakeholder's conduct. In so holding, the Court reversed the district court and remanded for further proceedings. View "Lee v. W. Coast Life Ins. Co." on Justia Law