Justia Business Law Opinion Summaries

Two siblings, Ryan and Nancy, disputed the administration of their father Hal’s estate and the status of his ownership interest in Tautphaus Park Storage, LLC (TPS), an Idaho storage facility business. Hal, who suffered from progressive dementia before his death, was TPS’s sole voting member and manager, with Nancy assisting in legal and management matters. Several amendments to TPS’s operating agreement changed ownership and management, culminating—after Hal’s death—in Nancy executing further amendments that retroactively transferred Hal’s economic interest to herself and changed accounting records. Nancy, an attorney, served as both Hal’s lawyer and later as personal representative of his estate. Ryan questioned whether Hal’s interest in TPS remained an estate asset and sought access to business records, which Nancy resisted.The siblings litigated issues in two related cases in Bonneville County: a probate case in the Magistrate Court regarding Hal’s estate, and a separate TEDRA (Trust and Estate Dispute Resolution Act) civil action in District Court initiated by Ryan. Both courts and parties at times treated the cases as consolidated. Ryan’s TEDRA complaint sought judicial determination of estate assets, breach of fiduciary duty, fraud, and appointment of a receiver, naming Nancy in both her individual and representative capacities and TPS as defendants. The magistrate court dismissed Ryan’s claims and removed Nancy and TPS as parties, finding that estate matters should be decided exclusively in probate. The district court affirmed, denying Ryan’s motions and dismissing his amended complaint, reasoning that Ryan’s claims were matters for probate only.On appeal, the Supreme Court of the State of Idaho vacated both lower courts’ judgments. It held that Ryan’s claims for judicial determination of estate assets and breach of fiduciary duty fall within TEDRA’s definition of “matters” and may be raised in a separate civil action, not only in probate. The Court reversed the orders dismissing claims and parties, remanded the case for further proceedings, and awarded costs and reasonable attorney fees to Ryan against Nancy personally. View "Monson v. Monson" on Justia Law

37celsius Capital Partners, a Milwaukee-based firm specializing in healthcare-related businesses, sought to acquire Care Innovations, a subsidiary of Intel Corporation. The parties entered into a nondisclosure agreement containing a “Hold Harmless” clause that limited damages, and subsequently executed a term sheet outlining the proposed transaction. The term sheet required 37celsius to contribute $12 million by a specified closing date and granted it an exclusivity period during which Intel could not negotiate with other parties regarding Care Innovations. The term sheet expressly limited legal obligations, stating that no binding contract would exist until a definitive agreement was executed, except for certain provisions such as confidentiality and exclusivity.After 37celsius failed to provide proof of the required funds by the closing date, Intel sold Care Innovations to another buyer. 37celsius filed suit in Wisconsin state court, alleging breach of contract based on Intel’s communications with third parties during the exclusivity period. The defendants removed the case to the United States District Court for the Eastern District of Wisconsin, which ruled that 37celsius was not entitled to expectation damages under the NDA and subsequently granted summary judgment for Intel, finding no reliance damages and no evidence of causation.The United States Court of Appeals for the Seventh Circuit reviewed the district court’s summary judgment de novo. It held that the term sheet was not a binding “Type II” preliminary agreement under Delaware law, as its language did not obligate the parties to negotiate in good faith. Further, even if a binding obligation existed, 37celsius could not show that Intel’s alleged breach was the but-for cause of the failed transaction, as 37celsius did not have the required funds. The court also concluded that the NDA barred expectation damages and 37celsius did not appeal the denial of reliance damages. The Seventh Circuit affirmed the district court’s judgment for Intel. View "37celsius Capital Partners, L.P. v Intel Corporation" on Justia Law

Cherry Grove Beach Gear, LLC, operated by Derek and Jacqueline Calhoun, began providing beach equipment rentals and setup services on public beaches in the City of North Myrtle Beach, South Carolina, starting in 2020. The City informed CGBG that its activities violated local ordinances, but the company continued operating despite repeated warnings and complaints from competitors. In response, the City enacted a new ordinance in June 2022 that explicitly restricted professional setup of beach equipment on City beaches to City officials only. CGBG persisted with its services and received several citations for noncompliance.Following these actions, CGBG filed a lawsuit in the United States District Court for the District of South Carolina, alleging that the City had unlawfully established a monopoly over beach equipment rentals and setup services, violating federal antitrust law. The district court granted summary judgment in favor of the City, determining that the municipal ordinances qualified for state action immunity from federal antitrust liability under the Parker doctrine, based on relevant South Carolina statutes.On appeal, the United States Court of Appeals for the Fourth Circuit reviewed the district court’s decision de novo. The Fourth Circuit held that the South Carolina statutes in question clearly articulated and affirmatively expressed state policy allowing municipalities to create exclusive franchises for beach equipment rentals and setup, and that the anticompetitive effects were a foreseeable result of this legislative authorization. The court also rejected CGBG’s argument for a “market participant exception” to state action immunity, noting that precedent does not recognize such an exception. Consequently, the Fourth Circuit concluded that the City is entitled to state action immunity and affirmed the district court’s judgment. View "Cherry Grove Beach Gear, LLC v. City of North Myrtle Beach" on Justia Law

Two companies, Gulf Coast Investments, LLC and Trigger Energy Holdings, LLC, sold their membership interests in Blueprint Energy Partners, LLC to TCU Holdings, LLC. Blueprint, formed in 2017 for shale oil operations in Wyoming, originally had three equal members: Gulf Coast, Trigger, and TCU, with Aladdin Capital, Inc. as the manager and primary creditor. After financial struggles and interpersonal conflicts, the parties negotiated the buyout in 2019. TCU’s principal, Kent Stevens, threatened to leave and take staff and clients unless Gulf Coast and Trigger agreed to a set price, known as the “dynamite option.” Despite these threats, the plaintiffs were represented by counsel who advised them of alternatives, and negotiations spanned several months, culminating in a signed purchase agreement.The Circuit Court of the Second Judicial Circuit, Minnehaha County, South Dakota, reviewed the plaintiffs’ post-sale lawsuit alleging economic duress, breach of operating agreement, breach of fiduciary duty, tortious interference, shareholder oppression, unjust enrichment, and sought accounting and injunctive relief. The circuit court granted summary judgment for the defendants on all counts, reasoning that the plaintiffs voluntarily entered the agreement, had legal alternatives, and that the contract itself contained a waiver of further claims. The court also addressed each substantive claim on its merits, finding no legal basis for recovery.On appeal, the Supreme Court of the State of South Dakota affirmed the circuit court’s grant of summary judgment. The Supreme Court held that, under either the three-part or two-part test for economic duress, the plaintiffs failed to show involuntary acceptance or lack of reasonable alternatives. The court also found no breach of the operating agreement or fiduciary duties, no tortious interference or shareholder oppression, and no basis for unjust enrichment or usurpation. The holding confirms the validity and enforceability of the purchase agreement and disposes of all claims against the defendants. View "Trigger Energy Holdings v. Stevens" on Justia Law

Two entities formed a limited liability company in 2012 to operate a high-end hair salon in Portsmouth, New Hampshire. One party contributed financial resources and business expertise, while the other, an established stylist, provided day-to-day management and became the public face of the business. In 2016, they amended their operating agreement to clarify their roles, contributions, and restrictions, including a provision that neither member could transfer their interest in the company without majority approval from disinterested members. The agreement required the stylist to devote all her business time to the company and prohibited competition during membership but was silent on withdrawal by a member.In 2022, after unsuccessful buyout negotiations, the stylist gave notice of her withdrawal from the company. The remaining members sued for breach of fiduciary duty, breach of contract, and sought a declaratory judgment requiring the stylist to continue dedicating her business time to the company. The Superior Court for Rockingham County granted in part and denied in part the stylist’s motion to dismiss, ruling her withdrawal was valid under the operating agreement and the New Hampshire Limited Liability Company Act. As a result, claims relying on her continued membership were dismissed, though the breach of contract claim for pre-withdrawal conduct was initially preserved. The plaintiffs withdrew the remaining contract claim, and the dismissal orders were finalized for appeal.Upon review, the Supreme Court of New Hampshire affirmed the lower court’s decision. It held that the operating agreement did not prohibit member withdrawal and that withdrawal was not a “transfer” requiring approval under the agreement. The court determined that the stylist retained her economic interest but lost membership rights upon withdrawal, consistent with the statute. The court further found no viable claim for damages or wrongful conduct, as the withdrawal did not breach the agreement or applicable law. View "Peregrine Interests LLC v. Todd" on Justia Law

Kevin Clay and his associate founded a pharmaceutical sales company that marketed compounded prescriptions directly to patients, promising them a share of the insurance reimbursements for each prescription filled. The company partnered with a pharmacy willing to pay a portion of the insurance proceeds and recruited employees from a local business whose health plan covered these prescriptions. Patients were directed to a doctor who readily prescribed the creams, resulting in millions of dollars in reimbursements over two years. Clay established a public charity to reduce his tax burden but used its funds for personal expenses and failed to comply with nonprofit requirements.The United States District Court for the Northern District of Ohio oversaw Clay’s trial. A jury convicted him of conspiracy to commit healthcare fraud, healthcare fraud, and making a false statement to the IRS, but acquitted him of a separate tax charge. The court sentenced Clay to 51 months’ imprisonment and ordered restitution totaling nearly $7 million to both Fiat Chrysler and the IRS. Clay appealed his convictions, sentence, and restitution orders.The United States Court of Appeals for the Sixth Circuit reviewed the case. The court affirmed Clay’s convictions and rejected his challenges to the jury instructions and evidentiary rulings. However, it found error in the district court’s restitution orders and the application of a sentencing enhancement. Specifically, the Sixth Circuit held that restitution should not include payments for medically necessary prescriptions and that the apportionment of restitution must consider each defendant’s contribution and economic circumstances. The court also determined the restitution order to the IRS was not properly substantiated and included acquitted conduct. Finally, the case was remanded for further proceedings on restitution and for clarification or reconsideration of the leadership sentencing enhancement. View "United States v. Clay" on Justia Law

In 2018, the board of a major clean-energy vehicle company approved a substantial equity compensation plan for its CEO, contingent on achieving a series of ambitious market capitalization and operational milestones. The plan granted the CEO the right to purchase significant company stock if these milestones were met. A company shareholder filed a derivative suit, alleging that the CEO, as a controlling stockholder, had improperly influenced the board to secure excessive compensation. The shareholder also claimed failures in disclosure to stockholders who later approved the plan.The Court of Chancery of the State of Delaware held a five-day trial. It found that the CEO exercised transaction-specific control despite not holding a majority of voting power. Concluding that the CEO and the board had breached their fiduciary duties, the court applied the “entire fairness” standard and ordered rescission of the CEO’s compensation package. After this decision, the board resubmitted the compensation plan to the stockholders with new disclosures, and a majority of disinterested stockholders approved it in a second vote. The board then requested that the court revise its prior judgment, but the Court of Chancery refused, maintaining rescission and awarding the plaintiff’s counsel substantial fees.On appeal, the Supreme Court of the State of Delaware reviewed whether rescission was a proper remedy. The Supreme Court held that rescission was improper because it could not restore all parties to their positions before the transaction, given the CEO’s six years of performance under the plan. The Court reversed the rescission remedy, reinstated the compensation plan, and awarded the plaintiff nominal damages. The Supreme Court further ruled that the plaintiff’s attorneys were entitled to fees based on the reasonable value of their services. View "In re Tesla, Inc. Derivative Litigation" on Justia Law

A non-profit religious organization sought to build an outdoor grotto, including a shrine, plaza, and walking path, on land adjacent to its existing church property. The new grotto was planned for a parcel subject to a lease and eventual transfer to the organization. The property was zoned for residential use, and while the church itself predated the zoning ordinance, the construction of accessory religious structures was not directly permitted under the current ordinance unless the church was located adjacent to an arterial street. The organization’s application acknowledged this restriction but requested approval for the project and setback variances.The Park Hills Board of Adjustment held a public hearing, received input both for and against the project, and ultimately approved the conditional use permit and variances, conditioned on the property transfer. Neighbors opposed to the project, specifically the Frederics, challenged the Board’s decision in the Kenton Circuit Court, arguing that the Board exceeded its authority under local ordinances and state law. The circuit court ruled in favor of the defendants, finding that the church was “grandfathered” due to its pre-zoning existence and that the Board did not act arbitrarily. The court did not address the federal Religious Land Use and Institutionalized Persons Act (RLUIPA) claim raised during summary judgment.On appeal, the Kentucky Court of Appeals reversed, holding the Board acted arbitrarily and exceeded its authority, as the expansion constituted an impermissible enlargement of a nonconforming use under both the zoning code and state law. The court also found no RLUIPA violation, reasoning that the ordinance did not impose a substantial burden on religious exercise.The Supreme Court of Kentucky granted discretionary review. The Court held that the RLUIPA defense was properly before it, as it had been tried by implied consent of the parties. On the merits, the Court concluded that denial of the permit did not impose a substantial burden under RLUIPA, applying the Sixth Circuit’s standard. The Court also found that the zoning ordinance did not violate RLUIPA’s equal-terms provision. The Court affirmed the Court of Appeals’ ruling, vacating the Board’s grant of the permit and variances. View "MISSIONARIES OF SAINT JOHN THE BAPTIST, INC. V. FREDERIC" on Justia Law

A nonprofit organization that publishes content critical of United States immigration policy was issued a subpoena by the New York Attorney General’s office seeking documents related to its governance, finances, and relationships with vendors and contractors. The organization alleged that the subpoena was motivated by a desire to suppress its viewpoints and thus violated its rights under the First Amendment and the New York State Constitution. The Attorney General, however, maintained that the investigation was prompted by concerns about possible self-dealing and regulatory noncompliance.After the subpoena was issued, the nonprofit partially responded but maintained objections. It then filed a federal lawsuit seeking damages and an injunction against enforcement of the subpoena, claiming the subpoena was retaliatory and unconstitutional. Shortly thereafter, the Attorney General initiated a special proceeding in New York State Supreme Court to compel compliance. The organization moved to dismiss or stay the state proceeding, raising constitutional arguments. The state court ruled against the nonprofit, ordering compliance with the subpoena (with some redactions allowed), and the New York Appellate Division, First Department affirmed. The New York Court of Appeals dismissed a further appeal.The United States District Court for the Northern District of New York denied the nonprofit’s request for a preliminary injunction and dismissed the federal claims, holding that they were precluded by the earlier state court judgment under the doctrine of res judicata. The United States Court of Appeals for the Second Circuit affirmed the district court’s judgment, holding that the state court’s decision was final and on the merits, involved the same parties and subject matter, and therefore barred the federal claims. The court also dismissed as moot the appeal of the denial of preliminary injunctive relief. View "VDARE Foundation, Inc. v. James" on Justia Law

Several business entities formed two limited partnerships to develop and manage affordable housing complexes in Tampa, Florida. Creative Choice Homes XXX, LLC and Creative Choice Homes XXXI, LLC acted as general partners in these partnerships, with various investor and special limited partners. The partnership agreements required the general partners to follow strict financial protocols, including restrictions on advances to affiliates and requirements for the proper distribution of profits. Over several years, financial audits revealed the general partners had made unauthorized advances to related entities, violating the agreements' terms. Despite repeated warnings from the limited partners, the general partners failed to cure the breaches within the periods specified in the agreements.After the limited partners provided formal notice of default, the general partners did not fully remedy the violations in a timely manner, including continuing improper transfers and attempting to cure by making late and improperly sourced payments. The limited partners consequently removed the general partners from their positions. The general partners filed suit in state court, seeking a declaration that their removal was improper and alleging breach of contract by the limited partners. The limited partners removed the case to the United States District Court for the Middle District of Florida and counterclaimed for breach of contract and declaratory relief.Following a bench trial, the district court ruled in favor of the limited partners, finding that the general partners materially breached the partnership agreements, failed to cure, and that removal did not constitute an impermissible forfeiture, waiver, or estoppel. On appeal, the United States Court of Appeals for the Eleventh Circuit affirmed. The court held that the general partners’ breaches were material, their cure efforts were insufficient, and that enforcing removal under the partnership agreements was proper and not inequitable. The district court’s judgment was affirmed. View "Creative Choice Homes XXX, LLC v. Amtax Holdings 690, LLC" on Justia Law