Justia Business Law Opinion Summaries

The defendant formed a company in 2005 that solicited funds from clients through financial agreements promising fixed returns, with the stated purpose of developing various businesses. Clients entered into these agreements, called "Productive Development Contracts," by making monetary contributions in exchange for promised earnings. The company failed to fulfill its obligations, and the government alleged that the defendant operated a Ponzi scheme, using funds from later clients to pay earlier ones, without generating legitimate profits. The indictment listed specific transactions involving eight clients, and at trial, both these and additional clients testified about their experiences and losses.The case was tried in the United States District Court for the District of Puerto Rico. The government presented evidence including client testimony, bank records, and summary exhibits prepared by a forensic accountant. The defendant objected to the admission of certain summary exhibits under Federal Rule of Evidence 1006, arguing they contained hearsay and improper conclusions. The district court overruled these objections, and the jury convicted the defendant on all counts. At sentencing, the court calculated loss and restitution amounts based on both testifying and non-testifying victims, resulting in a sentence of 135 months’ imprisonment and a restitution order exceeding $2.1 million. The defendant appealed, challenging the evidentiary rulings, sufficiency of the evidence, sentencing calculations, and restitution order.The United States Court of Appeals for the First Circuit affirmed the securities fraud conviction, sentence, and restitution order, but vacated the bank fraud convictions at the government’s request. The court held that any error in admitting the summary exhibits was harmless given the overwhelming unchallenged evidence. It found sufficient evidence supported the jury’s finding that the contracts were securities under the law. The court also upheld the district court’s loss and restitution calculations, concluding they were supported by reliable evidence and not plainly erroneous. View "United States v. Maldonado-Vargas" on Justia Law

A Maryland real estate investment trust with over 12,000 shareholders entered into an advisory agreement with UMTH General Services, L.P. and its affiliates to manage the trust’s investments and operations. The agreement stated that the advisor was in a fiduciary relationship with the trust and its shareholders, but individual shareholders were not parties to the agreement. After allegations of mismanagement and improper advancement of legal fees surfaced, a shareholder, Nexpoint Diversified Real Estate Trust, sued derivatively in Maryland. The Maryland court dismissed the claims for lack of standing and subject matter jurisdiction. Nexpoint then transferred its shares to a subsidiary, which, along with Nexpoint, sued the advisors directly in Texas, alleging corporate waste and mismanagement, and claimed the advisory agreement created a duty to individual shareholders.In the 191st District Court of Dallas County, the advisors filed a plea to the jurisdiction, a verified plea in abatement, and special exceptions, arguing that the claims were derivative and belonged to the trust, so the shareholders lacked standing and capacity to sue directly. The trial court denied these motions. The advisors sought mandamus relief from the Fifth Court of Appeals, which was denied, and then petitioned the Supreme Court of Texas.The Supreme Court of Texas held that while the shareholders alleged a financial injury sufficient for constitutional standing, they lacked the capacity to sue individually because the advisory agreement did not create a duty to individual shareholders, nor did it confer third-party beneficiary status. The agreement benefited shareholders collectively through the trust, not individually. The court conditionally granted mandamus relief, directing the trial court to vacate its order and dismiss the case with prejudice, holding that shareholders must pursue such claims derivatively and in the proper forum as specified by the trust’s governing documents. View "IN RE UMTH GENERAL SERVICES, L.P." on Justia Law

A company developed a specialized vehicle-mounted stairway, with design work primarily performed by the founder’s son, who was promised equity in the business but never received it due to the majority owner’s repeated refusals. The son, with his father’s assistance, eventually obtained a patent for the design, which he used as leverage to seek compensation. Negotiations between the parties failed, leading to the father’s removal as company president and the company filing suit against both the father and son. The company alleged breach of fiduciary duty, misappropriation of trade secrets, business conspiracy, unjust enrichment, fraud, and breach of contract, while the son counterclaimed for patent infringement.The United States District Court for the Eastern District of Virginia granted summary judgment to the father and son on all claims except a breach of contract claim against the father and the son’s patent counterclaim. The court found most claims time-barred or unsupported by evidence, and later, the company voluntarily dismissed its remaining claim. The son’s patent was invalidated by a jury. The district court also awarded attorneys’ fees and costs to the father as the prevailing party under the company’s operating agreement.The United States Court of Appeals for the Fourth Circuit reviewed the case de novo and affirmed the district court’s rulings. The appellate court held that the company’s claims were either time-barred under the applicable statutes of limitations or failed on the merits, as there was no evidence the son benefited from the patent or that he had signed a non-disclosure agreement. The court also affirmed the award of attorneys’ fees and costs to the father, finding no error in the district court’s application of Delaware law or its determination of the prevailing party. View "Mission Integrated Technologies, LLC v. Clemente" on Justia Law

Bloom Energy, a company specializing in fuel-cell servers, entered into Managed Services Agreements (MSAs), which are sale-leaseback arrangements involving banks and customers. The company initially classified these MSAs as operating leases, based on its assessment that the lease terms were less than 75% of the servers’ estimated useful lives and that the servers were not “integral equipment.” This classification affected how Bloom Energy reported revenue and liabilities in its financial statements. PricewaterhouseCoopers LLP (PwC) was engaged to audit Bloom Energy’s 2016 and 2017 financial statements, which were prepared by Bloom Energy’s management, and PwC issued an audit opinion stating that the financial statements were fairly presented in accordance with generally accepted accounting principles.After Bloom Energy went public in 2018, it later restated its financial statements, reclassifying certain MSAs as capital leases following a review prompted by PwC’s identification of an accounting issue. This restatement led to a significant drop in Bloom Energy’s stock price. Plaintiffs, consisting of shareholders, filed a class action in the United States District Court for the Northern District of California against Bloom Energy, its officers, directors, underwriters, and later added PwC as a defendant. They alleged violations of § 11 of the Securities Act of 1933, claiming that PwC was liable for material misstatements in the registration statement due to its audit opinion.The United States Court of Appeals for the Ninth Circuit reviewed the district court’s dismissal of the claims against PwC. The Ninth Circuit held that under § 11, an independent accountant is not strictly liable for information in a registration statement or financial statements merely because it certified them. PwC’s audit opinion was a statement of subjective judgment, protected as an opinion under Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, and did not contain actionable misstatements or omissions. The court affirmed the district court’s dismissal of the claims against PwC. View "HUNT V. PRICEWATERHOUSECOOPERS LLP" on Justia Law

In this case, the plaintiff bank sought to foreclose on a residential property in Vermont after the defendant defaulted on a $365,000 loan originally issued by Countrywide Home Loans, Inc. The mortgage was assigned to the plaintiff, and the bank alleged it was the holder of the note. However, the copy of the note attached to the complaint was made out to the original lender and lacked any indorsement. Over the years, the case was delayed by mediation, bankruptcy, and various motions. At trial, the plaintiff produced the original note with an undated indorsement in blank, but could not establish when it became the holder of the note.The Vermont Superior Court, Windsor Unit, Civil Division, denied the plaintiff’s initial summary judgment motion, finding that the plaintiff had not established standing under the Uniform Commercial Code. A later summary judgment was vacated due to procedural errors. After a hearing, the court found the plaintiff was currently a holder of the note and that the defendant had defaulted, but concluded that the plaintiff failed to prove it had the right to enforce the note at the time the complaint was filed, as required by U.S. Bank National Ass’n v. Kimball. Judgment was entered for the defendant, and the plaintiff’s post-judgment motion to designate the judgment as without prejudice was denied.On appeal, the Vermont Supreme Court affirmed the lower court’s decision. The Court held that a foreclosure plaintiff must demonstrate standing by showing it had the right to enforce the note at the time the complaint was filed, declining to overrule or limit Kimball. The Court also declined to address whether the judgment should be designated as without prejudice, leaving preclusion consequences to future proceedings. View "The Bank of New York Mellon v. Quinn" on Justia Law

A commercial real estate broker and consultant partnered with three brothers who owned an architecture and construction company to develop and lease a commercial property. They planned to form a limited liability company (LLC) as equal members, contributing professional services and cash, but did not formalize their agreement in writing. After a dispute arose over a broker commission, the brothers executed a backdated operating agreement that excluded the broker from LLC membership. The broker alleged he was unfairly cut out of the deal and sued for breach of contract and unjust enrichment.The Marshall Circuit Court granted summary judgment to the brothers on the contract claim, finding that Indiana law required written confirmation for LLC membership, which the broker lacked. The court also denied the broker’s request for a jury trial on the unjust enrichment claim, holding that both the claim and the defense of unclean hands were equitable issues for the judge. After a bench trial, the court ruled against the broker on unjust enrichment, finding he failed to prove his claim and that unclean hands barred recovery.On appeal, the Indiana Court of Appeals reversed, holding that initial LLC membership could be established by oral agreement and that unjust enrichment claims for money damages were legal claims entitled to a jury trial. The Indiana Supreme Court granted transfer, vacating the appellate decision.The Indiana Supreme Court held that LLC membership under the Business Flexibility Act requires either a written operating agreement or written confirmation, and the broker was not a member as a matter of law. However, genuine factual disputes remained regarding whether the brothers breached an agreement to make him a member, precluding summary judgment. The Court also held that unjust enrichment claims for money damages are legal claims subject to a jury trial, and the unclean hands doctrine may be asserted as a defense. The judgment was vacated and the case remanded for a jury trial on both claims. View "Andrew Nemeth Properties, LLC v. Panzica" on Justia Law

Ticonderoga Farms is a family-owned farming and agritourism business in Northern Virginia, managed by Peter J. Knop, who holds a majority interest. Over the years, Peter gifted shares to his children, resulting in Alexandra B. Knop and William J.W. Knop, along with the Evergreen Trust, holding minority interests. Persistent disputes arose among the family members regarding ownership percentages, management decisions, and financial transparency. In 2015, Peter converted the corporation into a limited liability company, assigning membership interests based on his own calculations, which the minority members contested. The parties engaged in extensive litigation over ownership, property, and company management, culminating in Peter issuing a capital call for substantial contributions from all members, which the minority members refused, citing lack of authority and transparency.The Loudoun County Circuit Court held a bench trial to resolve the disputes. It found that the purported operating agreement drafted by Peter was invalid, so the company was governed by the default provisions of the Virginia Limited Liability Company Act. The court ruled that Peter lacked authority to make the capital call and that the minority members were entitled to access company records. Regarding Peter’s request for judicial expulsion of the minority members under Code § 13.1-1040.1(5), the court found no material breach or wrongful conduct by the minority members and concluded their actions did not directly cause the company’s dysfunction. The court denied expulsion and, finding it not reasonably practicable for the company to continue business, ordered judicial dissolution of Ticonderoga Farms under Code § 13.1-1047.The Court of Appeals of Virginia affirmed the circuit court’s rulings, deferring to its factual findings. The Supreme Court of Virginia now reviews the case and holds that judicial expulsion under Code § 13.1-1040.1(5)(c) requires a direct causal link between a member’s conduct and the impracticability of business, which was not established here. Judicial dissolution under Code § 13.1-1047 is appropriate when it is not reasonably practicable to continue business, regardless of fault. The Supreme Court affirms the judgment of the Court of Appeals. View "Ticonderoga Farms, LLC v. Knop" on Justia Law

Karen L. Willis, operating as Harlem West Entertainment and married to Victor Willis, the original lead singer of the Village People, alleged that the Walt Disney Company and related entities engaged in unfair competition and fraud. The dispute arose after Disney hired the reconstituted Village People, led by Victor Willis, for performances at Walt Disney World in 2018. Following these events, Willis claimed Disney instituted a secret ban on booking the Village People for future concerts and made misleading statements to the band’s agents about potential future engagements. Willis asserted that Disney’s actions, including evasive communications and refusal to consider booking proposals, constituted unlawful, unfair, and fraudulent business practices.The Superior Court of San Diego County reviewed Disney’s special motion to strike the complaint under California’s anti-SLAPP statute (Code of Civil Procedure section 425.16). The trial court denied Disney’s motion, finding that Disney failed to meet its initial burden of showing that the conduct alleged in Willis’s complaint was protected activity under the anti-SLAPP statute’s catchall provision. The court concluded that, although the conduct implicated a public issue, it did not further or participate in a public conversation about that issue. As a result, the trial court did not address Disney’s evidentiary objections or whether Willis’s claims had minimal merit.The California Court of Appeal, Fourth Appellate District, Division One, reviewed the case and reversed the trial court’s order. The appellate court held that Disney’s selection of musical acts for public concerts and its related communications with the Village People’s agents were protected conduct under the anti-SLAPP statute’s catchall provision. The court remanded the case to the trial court to determine whether Willis’s claims have minimal merit, as required by the second prong of the anti-SLAPP analysis. View "Willis v. The Walt Disney Company" on Justia Law

Two individuals, Kellogg and Mathiesen, formed a limited liability company (LLC) to provide in-home personal care services. Over time, disputes arose regarding ownership interests, capital contributions, and management of the company. The parties executed several agreements, including a 2017 contract transferring Mathiesen’s ownership to Kellogg due to his ineligibility as a Medicaid provider, and a 2019 contract in which Kellogg sold Mathiesen a 50% interest in the LLC’s assets. Allegations of mismanagement, misuse of company funds, and inappropriate conduct by Mathiesen led to litigation between the parties, including derivative claims and counterclaims. Kellogg also sought judicial dissolution of the LLC, citing unlawful conduct and irreconcilable differences.The District Court for Douglas County held a bench trial and found both Kellogg and Mathiesen to be 50-percent co-owners or managers of the LLC. The court denied all derivative claims and counterclaims, citing unclean hands by both parties. However, the court granted Kellogg’s application for dissolution, finding Mathiesen’s conduct oppressive and fraudulent, and ordered the appointment of a receiver to oversee the dissolution and possible sale of the company. Mathiesen appealed both the judgment and the receiver’s appointment.The Nebraska Supreme Court reviewed the consolidated appeals, limiting its review to plain error due to deficiencies in Mathiesen’s appellate briefing. The court determined it had jurisdiction over both appeals and addressed Mathiesen’s argument that Kellogg lacked standing. The court held that Kellogg remained a member of the LLC at the time of filing her derivative action and thus had standing. Finding no plain error in the record, the Nebraska Supreme Court affirmed the district court’s judgment and the order appointing a receiver. View "Kellogg v. Mathiesen" on Justia Law

Two psychiatrists challenged the practices of the American Board of Psychiatry and Neurology (ABPN), alleging that ABPN unlawfully tied its specialty certification to its maintenance of certification (MOC) product, thereby violating antitrust law and causing unjust enrichment. The plaintiffs argued that ABPN’s monopoly over specialty certifications forced doctors to purchase the MOC product, which includes both activity and assessment requirements, in order to maintain their professional standing and employment opportunities. They claimed that the MOC product functioned as a substitute for other continuing medical education (CME) products required for state licensure, and that this arrangement harmed competition in the CME market.The United States District Court for the Northern District of Illinois dismissed the plaintiffs’ second amended complaint with prejudice. The district court found that the plaintiffs failed to plausibly allege an illegal tying arrangement under Section 1 of the Sherman Act, specifically because they did not show that ABPN’s MOC product was a viable substitute for other CME products. The court also concluded that the plaintiffs had multiple opportunities to amend their complaint and had not demonstrated how further amendment would cure the deficiencies.On appeal, the United States Court of Appeals for the Seventh Circuit reviewed the dismissal de novo and affirmed the district court’s decision. The Seventh Circuit held that the plaintiffs did not plausibly allege that psychiatrists and neurologists view ABPN’s MOC product as reasonably interchangeable with other CME offerings. The court found that, even if MOC participation could partially or fully satisfy state CME requirements, the additional time, cost, and effort required by the MOC program made it implausible that doctors would choose MOC over other CME products. The court also upheld the district court’s decision to dismiss the complaint with prejudice, finding no abuse of discretion. View "Lazarou v. American Board of Psychiatry and Neurology" on Justia Law