Justia Business Law Opinion Summaries

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The Federal Trade Commission (the “Commission”) alleges that Defendant and his six companies engaged in unfair or deceptive business practices in violation of Section 5(a) of the Federal Trade Commission Act and the Telemarketing Sales Rule. Relying on its authority under Section 13(b) of the FTC Act, the Commission obtained a preliminary injunction that included an asset freeze and the imposition of a receiver. Defendant argued that the preliminary injunction must be dissolved because a recent Supreme Court decision undermines the Commission’s Section 13(b) authority.
The Eleventh Circuit affirmed the order denying Defendant’s emergency motion to dissolve the preliminary injunction. The court explained that Defendant urged the court to read AMG Capital as a signal to interpret the FTC Act with a view to “reigning in the FTC’s power.” But, the court wrote, that AMG Capital teaches the court to read the FTC Act to “mean what it says.” 141 S. Ct. at 1349. In AMG Capital, that meant limiting Section 13(b)’s provision for a “permanent injunction” to injunctive relief. Here, that means recognizing the broad scope of relief available under Section 19. When the Commission enforces a rule, Section 19 grants the district court jurisdiction to offer relief “necessary to redress injury to consumers.” To preserve funds for consumers, the Commission sought to freeze Defendant’s assets and impose a receivership over his companies. Section 19 allows such relief. View "Federal Trade Commission v. Steven J. Dorfman" on Justia Law

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The Court of Chancery denied Defendant's motion to dismiss this action brought by stockholders of McDonald's Corporation (the Company) claiming breach of the duty of oversight and breach of the duty of loyalty, holding that Plaintiffs stated a claim sufficient to survive the motion to dismiss.From 2015 until his termination in 2019, Defendant served as the Company's executive vice president and global people officer. Defendant was disciplined in 2018 for sexual harassment then terminated after he committed another act of sexual harassment. Plaintiffs sued Defendant derivatively on the Company's behalf, alleging (1) as human resources officer, Defendant breached his fiduciary duties by ignoring red flags regarding sexual harassment and misconduct at the Company; and (2) Defendant's own acts of sexual harassment constituted a breach of duty in themselves. Defendant filed a motion to dismiss under Rule 12(b)(6), arguing that Delaware law does not impose on officers a duty of oversight. The Court of Chancery denied the motion to dismiss, holding (1) corporate officers owe the same fiduciary duties as corporate directors, which includes a duty of oversight; (2) Plaintiffs stated a claim against Defendant for breach of his oversight duties; and (3) Plaintiffs' claim against Defendant for his acts of sexual harassment stated a claim upon which relief could be granted. View "In re McDonald's Corporation Stockholder Derivative Litigation" on Justia Law

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The First Circuit affirmed in part and reversed in part the judgment of the district court dismissing Plaintiff's amended complaint bringing claims for product disparagement and related torts, holding that some of Plaintiff's claims were sufficiently plausible to warrant further proceedings.Plaintiff, a medical device company that designed and manufactured customized hip and knee replacements, brought this complaint against Aetna, Inc. and its wholly owned subsidiary (collectively, Aetna) alleging state common-law claims for product disparagement, tortious interference with both contractual and advantageous relations, and unfair trade practices, in violation of Mass. Gen. Laws chapter 93A. The district court granted Aetna's motion to dismiss for failure to state a claim. The First Circuit reversed in part, holding that the district court correctly dismissed Plaintiff's claim for tortious interference with contractual relations but erred in dismissing Plaintiff's claim for tortious interference with advantageous relations. View "Conformis, Inc. v. Aetna, Inc." on Justia Law

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Joy Global and Komatsu agreed to merge. Joy sent its investors disclosures required under the Securities Exchange Act, 15 U.S.C. 78n. Subsequent suits contended that Joy violated the Act by not disclosing some internal projections of Joy’s future growth that could have been used to negotiate a higher price, rendering the proxy statements fraudulent, and that Joy’s directors violated their state law duties by not maximizing the price for the shareholders. The suits settled for $21 million.The district court held that the $21 million loss is not covered by insurance. The policies do not require indemnification for “any amount of any judgment or settlement of any Inadequate Consideration Claim other than Defense Costs.” An “inadequate consideration claim” is that part of any Claim alleging that the price or consideration paid or proposed to be paid for the acquisition or completion of the acquisition of all or substantially all the ownership interest in or assets of an entity is inadequate.The Seventh Circuit affirmed. The suits assert the wrongful act of failing to disclose documents that could have been used to seek a higher price and are within the definition of “inadequate consideration claim.” The claims do not identify any false or deficient disclosures about anything other than the price. The only objection to this merger was that Joy should have held out for more money, and that revealing this would have induced the investors to vote “no.” View "Joy Global Inc. v. Columbia Casualty Co." on Justia Law

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This case presented an issue of first impression for the Mississippi Supreme Court: whether an attorney’s representation of a general partnership created an implied attorney-client relationship between the attorney and the individual members of the general partnership, and, if so, whether the Mississippi Rule of Professional Conduct prohibiting communication by a lawyer with an individual represented by other legal counsel was violated. James Pettis, III, attorney for the plaintiff, appealed a chancery court order disqualifying him for a violation of Mississippi Rule of Professional Conduct 4.2, which prohibited a lawyer from communicating with a person they know to be represented about the subject of the representation. After a careful review of the law, the Supreme Court reversed the chancery court’s order, rendered judgment in favor of Pettis, and remanded for further proceedings. View "Pettis v. Simrall" on Justia Law

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Millennium's laboratory provides drug testing to healthcare professionals. Mauthe, a private practice MD, used Millennium’s services. On May 2, 2017, Millennium faxed all of its customers a single-page flyer promoting a free educational seminar to “highlight national trends in opioid misuse and abuse . . . and discuss the role of medication monitoring ... during the care of injured workers.” Although Millennium offered urine testing to detect opioids, the fax did not mention that service nor provide any pricing information, discounts, or product images. The seminar did not promote any goods or services for sale but described statistics on opioid abuse and the role of such drugs in chronic pain management. It explained that drug testing could help detect or monitor opioid abuse, and assessed the efficacy of several testing methods. The seminar did not identify providers or prices for any of the drug testing methods it reviewed. After the seminar, Millennium did not follow up with any registrants or attendees.Mauthe who has sued fax senders in more than 10 lawsuits since 2015, seeking damages under the Telephone Consumer Protection Act, 47 U.S.C. 227, (b)(3), filed a putative class action against Millennium. The Third Circuit affirmed the dismissal of the suit. Liability under the TCPA extends only to “unsolicited advertisement[s],” meaning communications that promote the sale of goods, services, or property. Under an objective standard, no reasonable recipient could construe the seminar fax as such an unsolicited advertisement. View "Robert W Mauthe MD PC v. Millennium Health LLC" on Justia Law

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In this action brought by Plaintiffs, three out of the five children of Dr. Robert M. Harris and Mary Ellen Harris, who were gifted certain shares of the corporation formed by their father (Company), as tenants of by the entirety, the Court of Chancery deferred a decision on Michael Schwager's motion to dismiss the counts that named him as a defendant, holding that a determination must be made as to whether personal jurisdiction over Schwager existed.Plaintiffs alleged that as Dr. Harris's health was failing, Mary Ellen and her friends and advised scheme to seize control of the Company and engaged in a series of self-dealing transactions that tunneled millions of dollars out of the Company. Plaintiffs brought claims for breach of fiduciary duty and abetting breaches of fiduciary duty against Mary Ellen and her advisors, including Michael Schwager, challenged a merger that Mary Ellen effectuated to move the company to New Jersey, and argued that Mary Ellen violated the trust agreement. Schwager filed a motion to dismiss the claims against him for lack of personal jurisdiction. The Court of Chancery deferred considering Schwager's motion to dismiss under 12(b)(6) until after the trial court could determine whether jurisdiction over Schwager existed, holding that additional jurisdictional discovery was required. View "Harris v. Harris" on Justia Law

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In this suit brought under the Racketeering Influence and Corrupt Organizations Act (RICO), the First Circuit remanded this matter for further review, holding that the district court erred in dismissing the complaint based on the doctrine of forum non conveniens.Medtronic Medical CR SRL, a Costa Rica limited liability company, brought suit under RICO alleging that Defendants, Puerto Rico residents, orchestrated fraudulent schemes. The district court granted Defendants' motion to dismiss based on the doctrine of forum non conveniens, concluding that Costa Rica was an adequate alternative forum. The First Circuit remanded the case, holding that intervening and developing circumstances required reconsideration of the most efficient, prudential path forward. View "Medtronic Medical CR SRL v. Feliciano-Soto" on Justia Law

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Palma worked for FCA starting in 2013 and allegedly participated in a scheme that manipulated FCA's new diesel engine’s function during testing to produce artificially impressive results with respect to features that FCA was targeting to customers, including fuel economy greater than 30 mpg and a frequency of fluid changes similar to that of gasoline-powered cars. When the vehicles were tested for emissions, the program activated Exhaust Gas Recirculation, sacrificing fuel economy. When the vehicles were tested for fuel economy, Recirculation was lowered, increasing emissions. Palma knew that these results were critical to receiving the “best-in-class” fuel economy ratings and that the vehicles did not meet EPA requirements. A sticker affixed to the cars stated they complied with regulations and provided detailed emissions information, as influenced by Palma's scheme. FCA sold more than 100,000 of these vehicles. Customers who purchased the vehicles said that the misleading representations were material to their purchase decisions.Palma was charged with 13 counts, including conspiracy to commit wire fraud, 18 U.S.C. 1349. The district court held that there was an insufficient causal nexus between Palma’s conduct and customers being induced to purchase vehicles and that Palma’s conduct was less a deprivation of consumer property and more a deception of regulators. The Seventh Circuit reversed the dismissal of that count, reasoning that Palma was only charged with conspiracy, not wire fraud itself, and the indictment alleges adequate facts tying Palma to a fraudulent scheme. View "United States v. Palma" on Justia Law

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The Supreme Court reversed the judgment of the court of appeals reversing the trial court's dismissal of the complaint and reinstated the judgment of the trial court dismissing all of Petitioner's claims against Respondents for breach of contract, fraud, and related torts, holding that the discovery rule did not defer accrual of Petitioner's cause of action until it knew that Respondents caused its injury.The trial court granted summary judgment in favor of Petitioner on the grounds that Respondents' claims were time-barred. The appellate court reversed, concluding that the discovery rule deferred accrual of Respondents' cause of action until it knew that Petitioner caused its injury. The Supreme Court reversed and reinstated the dismissal of all claims, holding that summary judgment was appropriate because, at the time of the breach of contract at issue, Respondent learned of facts that, if pursued, would have led to the discovery of Petitioner's alleged misrepresentations. View "Marcus & Millichap Real Estate Investment Services of Nev. v. Triex Texas Holdings, LLC" on Justia Law