Justia Business Law Opinion Summaries

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Defendants-tenants John and Rosa Castro (the tenants) leased a residential property from plaintiff-landlord Fred Graylee. The landlord brought an unlawful detainer action against the tenants, alleging they owed him $27,100 in unpaid rent. The day of trial, the parties entered into a stipulated judgment in which the tenants agreed to vacate the property by a certain date and time. If they failed to do so, the landlord would be entitled to enter a $28,970 judgment against them. The tenants missed their move-out deadline by a few hours and the landlord filed a motion seeking entry of judgment. The trial court granted the motion and entered a $28,970 judgment against the tenants under the terms of the stipulation. The tenants appealed, arguing the judgment constituted an unenforceable penalty because it bore no reasonable relationship to the range of actual damages the parties could have anticipated would flow from a breach of the stipulation. To this, the Court of Appeal agreed, and reversed and remanded this matter for further proceedings. View "Graylee v. Castro" on Justia Law

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The Supreme Judicial Court affirmed the judgment of the superior court in favor of Tucker Cianchette and CBF Associates, LLC (collectively, Tucker) and against Peggy Cianchette, Eric Cianchette, PET, LLC and Cianchette Family, LLC (collectively, Peggy and Eric) on Tucker's claims against Peggy and Eric and on Peggy and Eric's counterclaim against Tucker, holding that the superior court did not err in clarifying that post-judgment interest began to run on March 15, 2018. In this second appeal before the Supreme Court, the parties sought resolution of two legal issues regarding post-judgment interest: (1) whether the trial court had jurisdiction to issue an order on post-judgment interest, and (2) on what date prejudgment interest ceased and post-judgment interest began to accrue. The Supreme Judicial Court held (1) the trial court had authority to act and did not abuse its discretion in clarifying its judgments to resolve the parties' uncertainty surrounding post-judgment interest; and (2) post-judgment interest did not begin to run until the court entered the final judgment on March 15, 2018. View "Cianchette v. Cianchette" on Justia Law

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The Supreme Court held that tortious interference with at-will contracts requires independent wrongfulness and that a rule of reason applies to determine the validity of a settlement provision requiring Forward Pharma to terminate its agreement with Ixchel Pharma, LLC under Cal. Bus. & Prof. Code 16600. Ixchel, a biotechnology company, entered into an agreement with Forward jointly to develop a drug for the treatment of Friedreich's ataxia. Forward later withdrew from the agreement, which was allowed by the agreement's terms. Pursuant to a settlement with Biogen, Inc., another biotechnology company, Forward agreed to terminate its contract with Ixchel. Ixchel sued Biogen in federal court for tortiously interfering with Ixchel's contractual and prospective economic relationship with Forward in violation of section 16600. On appeal, the federal appeals court certified two questions to the Supreme Court. The Supreme Court held (1) tortious interference with at-will contracts requires independent wrongfulness, and therefore, Ixchel must allege that Biogen interfered with its at-will contract through wrongful means; and (2) the validity of the settlement provision at issue must be evaluated based on a rule of reason. View "Ixchel Pharma, LLC v. Biogen, Inc." on Justia Law

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The Court of Chancery granted in part and denied in part the motion for partial summary judgment filed by Applied Energetics, Inc. (the Company) on its claims against George Farley, the Company's former director and principal executive officer, and AnneMarieCo, LLC, holding that Farley lacked authority to issue himself twenty-five million shares and grant himself an annual salary of $150,000 per year but that the Company was not entitled to summary judgment on Farley's counterclaims. The Company asserted several claims based on Farley's actions. Farley filed counterclaims against the Company for breach of contract, for unjust enrichment, and to validate his actions under section 205 of the Delaware General Corporation Law. The Company moved for partial summary judgment. The Court of Chancery granted the motion in part and denied it in part, holding (1) because Farley was the Company's sole remaining director when he issued himself stock and granted himself compensation, Farley's actions were invalid; (2) because the Company had the corporate power to issue shares and compensate its officers and directors Farley's acts could be validated under section 205; (3) the Court had the power to validate Farley's decision to grant himself a salary; and (4) evidence could support Farley's claim for compensation under a theory of quantum merit. View "Applied Energetics, Inc. v. Farley" on Justia Law

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Two counties sued Sherwin-Williams in state court, seeking abatement of the public nuisance caused by lead-based paint. Anticipating suits by other counties, Sherwin-Williams sued in federal court under 42 U.S.C. 1983. Sherwin-Williams claimed that “[i]t is likely that the fee agreement between [Delaware County] and the outside trial lawyers [is] or will be substantively similar to an agreement struck by the same attorneys and Lehigh County to pursue what appears to be identical litigation” and that “the Count[y] ha[s] effectively and impermissibly delegated [its] exercise of police power to the private trial attorneys” by vesting the prosecutorial function in someone who has a financial interest in using the government’s police power to hold a defendant liable. The complaint pleaded a First Amendment violation, citing the company’s membership in trade associations, Sherwin-Williams’ purported petitioning of federal, state, and local governments, and its commercial speech. The complaint also argued that the public nuisance theory would seek to impose liability “that is grossly disproportionate,” arbitrary, retroactive, vague, and “after an unexplainable, prejudicial, and extraordinarily long delay, in violation of the Due Process Clause.” The Third Circuit affirmed the dismissal of the suit. Sherwin-Williams failed to plead an injury in fact or a ripe case or controversy because the alleged harms hinged on the County actually filing suit. View "Sherwin Williams Co. v. County of Delaware" on Justia Law

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Dr. Dominick Lembo employed Arlene Marchese in his dental practice as his office manager, and Karen Wright, a dental hygienist. Sometime before December 2011, Marchese and Wright unlawfully took possession of numerous checks totaling several hundred thousand dollars, forged Lembo’s indorsement on the checks, and deposited the proceeds from the forged checks into their personal accounts at TD Bank. In February 2015, Lembo filed a complaint against TD Bank, alleging that “TD Bank knew or should have known that Marchese and/or Wright were not permitted to negotiate checks made payable to [Lembo].” The complaint also alleged that by permitting them to negotiate checks with forged indorsements, TD Bank “aided and abetted Marchese and Wright in their fraudulent scheme and conduct.” The complaint did not assert that Lembo had a banking relationship with TD Bank. And Lembo did not file an action for conversion under the Uniform Commercial Code (UCC) within the three-year limitations period. Had Lembo done so, TD Bank would have been strictly liable for depositing or cashing those checks, subject to the defenses in N.J.S.A. 12A:3-405 or N.J.S.A. 12A:3-406. The trial court granted the Bank's motion to dismiss, finding that the UCC governed Lembo's remedies against the Bank, and “common law negligence is not such a remedy” in the absence of a “special relationship” between Lembo and the bank. The court also rejected Lembo’s argument that the Uniform Fiduciaries Law (UFL) provided an affirmative cause of action against the bank. The Appellate Division reversed, reading into the complaint the basis for an affirmative UFL claim, and remanded to allow Lembo to amend the complaint to assert such a claim. The New Jersey Supreme Court concluded the Appellate Division misconstrued the purpose of the UFL, finding the Legislature enacted the UFL not to create an affirmative cause of action against a bank but to provide a defense when the bank is sued for failing to take notice of and action on the breach of a fiduciary’s obligation. "The UFL confers a limited immunity on a bank, unless the bank acts in bad faith or has actual knowledge of a fiduciary breach." The Supreme Court found no affirmative cause of action arose under the statute; whether a UFL claim was adequately pled was therefore moot. Recognizing the predominant role the UCC plays in assigning liability for the handling of checks, the Supreme Court also found Lembo had no “special relationship” with the bank to sustain the common law causes of action. View "Lembo v. Marchese" on Justia Law

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Since 2010, appellant Mark Spanakos has tried to gain control over and revive Hawk Systems, Inc., a void Delaware corporation, by filing a series of direct and derivative actions in Florida against former Hawk Systems insiders and taking several steps outside of court to establish himself as the Company’s majority stockholder and sole director. Spanakos was successful in his direct Florida litigation, having won a Partial Final Judgment in one action and favorable Summary Judgment rulings in another. Spanakos’s derivative claims in the third Florida action, however, were stayed to allow Spanakos to clarify his standing to pursue those claims. Accordingly, in 2018 Spanakos filed suit in the Delaware Court of Chancery seeking: (1) a declaration that he controlled a majority of the voting shares of Hawk Systems and that he was the validly elected, sole director and officer of Hawk Systems; or (2) in the alternative, an order compelling the company to hold an annual election of directors under 8 Del. C. sections 223(a) and 211(c). Following a trial, briefing, and post-trial argument, the Court of Chancery denied both of Spanakos’s requests for relief, ruling that he had not carried his burden of proof to obtain any of the relief that he sought. On appeal, Spanakos argues that the Court of Chancery abused its discretion when it declined to order a stockholders’ meeting for the election of directors despite the fact that Spanakos satisfied the elements of Section 211. Having reviewed the record on appeal and the court’s opinion below, the Delaware Supreme Court found the Court of Chancery did not abuse its discretion when it declined to compel a stockholders’ meeting given the unique facts of this case. View "Spanakos v. Page, et al." on Justia Law

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Plaintiff-investors appealed the dismissal of their claims against the Vermont Agency of Commerce and Community Development (ACCD) and current and former state employees arising from the operation of a federally licensed regional center in the United States Customs and Immigration Services (USCIS) EB-5 program. USCIS designated ACCD as a regional center in 1997, and ACCD began operating the Vermont Regional Center (VRC). It was not the only state-affiliated regional center, but it was the only one that represented itself as a “state-run agency.” The VRC billed itself as an attractive option for development and foreign investment due to its superlative “oversight powers,” the overwhelming investor confidence that came from its “stamp of approval,” and the State of Vermont’s backing that would result in a “faster path to approval.” ACCD employees represented to prospective investors, including plaintiffs, that the added protections of state approval and oversight made the "Jay Peak Projects" a particularly sound investment. They told prospective investors that the VRC conducted quarterly reviews to ensure that projects complied with all applicable laws and regulations and “engag[ed] in the financial monitoring and auditing of projects to ensure legitimacy,” and they represented that MOUs imposed “strict covenants and obligations on the project to ensure compliance with all applicable laws and regulations.” Unbeknownst to the investors, but known to the VRC officials, no such state oversight by the VRC existed. The VRC never issued any of the quarterly reports contemplated in the MOUs. In April 2016, the U.S. Securities and Exchange Commission filed a lawsuit alleging securities fraud, wire fraud, and mail fraud against the Jay Peak Projects developers. On the basis of these and other allegations, plaintiffs, all foreign nationals who invested in the Jay Peak Projects, filed a multi-count claim against ACCD and several individual defendants. The trial court granted plaintiffs’ motion to amend their complaint for a third time to a Fourth Amended Complaint, and then dismissed all thirteen counts on various grounds. Plaintiffs appealed. After review, the Vermont Supreme Court reversed the dismissal of plaintiffs’ claims of negligence against ACCD, gross negligence against defendants Brent Raymond and James Candido, and breach of contract and the implied covenant of good faith and fair dealing against ACCD. The Court affirmed the dismissal of plaintiffs' remaining claims. View "Sutton et al. v. Vermont Regional Center et al." on Justia Law

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David and Jill Landrum began developing land in Livingston, Madison County, Mississippi, in approximately 2006. David sought financial assistance from Michael Sharpe. Michael invested substantial sums in the business, and his wife, Marna Sharpe, gained a membership interest in the business. In 2010, Livingston Holdings, LLC (Livingston), a Mississippi limited-liability company, was formed. The original members of the company were Jill, Marna, and Sara Williams. Livingston acquired Williams’s ownership interests, and Marna later assigned her membership interest to B&S Holdings, LLC (B&S). The development became the Town of Livingston. The members of Livingston consisted of B&S and Jill. In this dispute between the members of the limited-liability company, the question presented for the Mississippi Supreme Court's review was whether statutory provisions prevented the enforcement of an arbitration provision and waiver contained in the operating agreement of the company. Because the Court determined the statutory provisions did not control over the terms of the operating agreement, it affirmed the trial court’s decision to compel arbitration. View "B&S MS Holdings, LLC v. Landrum" on Justia Law

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The Ninth Circuit reversed the district court's dismissal of actor Ashley Judd's sexual harassment claim under California Civil Code section 51.9 against producer Harvey Weinstein. Judd alleged that, in the late 1990s, Weinstein sexually harassed her during a general business meeting and derailed her potential involvement in the film adaptation of "The Lord of the Rings" book trilogy. The panel held that, as alleged, section 51.9 plainly encompasses Judd and Weinstein's relationship, which was "substantially similar" to the "business, service, or professional relationship[s]" enumerated in the statute. The panel explained that the relationship between Judd and Weinstein was characterized by a considerable imbalance of power substantially similar to the imbalances that characterize the enumerated relationships in section 51.9. The panel stated that, by virtue of his professional position and influence as a top producer in Hollywood, Weinstein was uniquely situated to exercise coercive power or leverage over Judd, who was a young actor at the beginning of her career at the time of the alleged harassment. Furthermore, given Weinstein's highly influential and "unavoidable" presence in the film industry, the relationship was one that would have been difficult to terminate "without tangible hardship" to Judd, whose livelihood as an actor depended on being cast for roles. The panel rejected Weinstein's arguments to the contrary and held that Judd sufficiently alleged a claim under section 51.9. Accordingly, the panel remanded for further proceedings. View "Judd v. Weinstein" on Justia Law