Justia Business Law Opinion Summaries

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In this case, a South Carolina court-appointed receiver brought an action against Travelers Casualty and Surety Company and other insurers, alleging breaches of insurance policies issued to a defunct company within a state receivership. Travelers removed the action to federal court, asserting diversity jurisdiction. However, the district court granted the receiver’s motion to remand the case back to state court. The court held that it lacked subject-matter jurisdiction because the case involved property of a state receivership exclusively under the jurisdiction of the state court (based on the doctrine articulated in Barton v. Barbour), and the removal lacked unanimous consent of all defendants due to a forum selection clause in some of the insurance policies issued to the defunct company.Upon appeal, the United States Court of Appeals for the Fourth Circuit dismissed the appeal, holding that the district court's conclusions in support of remand were at least colorably supported. The court found that the district court's reliance on a lack of subject-matter jurisdiction and procedural defect as grounds for remand were colorably supported, and thus, not reviewable under 28 U.S.C. § 1447(d). The court also concluded that it lacked jurisdiction to review the district court's remand order and dismissed the appeal. View "Protopapas v. Travelers Casualty and Surety Co." on Justia Law

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Aluminum Recovery Technologies (ART) operates a smelter and during a renovation, one of its furnaces failed, causing molten aluminum to escape and damage the plant and the furnace itself. The insurance company, ACE American Insurance, paid for some of the damages but not the cost of replacing the furnace's refractory. ART sued ACE, arguing that an explosion in the furnace caused the damage and thus, the insurance company should cover the refractory replacement costs. However, the insurer argued that the policy specifically excludes coverage for any damage to the refractory lining unless it directly results from specific perils such as fire, lightning, windstorm, hail, or explosion. The United States Court of Appeals For the Seventh Circuit affirmed the district court's decision in favor of ACE. The court held that the explosion did not necessarily cause the leak, and ART failed to provide engineering evidence to support its claims. Additionally, the court found that ART had consented to the investigation protocol proposed by the insurer's experts, which involved destructive testing that led to the need for the refractory's replacement. Therefore, the insurer was not responsible for the additional expenses incurred due to the replacement of the refractory lining. View "Aluminum Recovery Technologies, Inc. v. Ace American Insurance Co." on Justia Law

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In the case of West Palm Beach Firefighters' Pension Fund v. Moelis & Company, the plaintiff, a stockholder of Moelis & Company (the "Company"), challenged the validity of certain provisions in a Stockholder Agreement between the Company and its CEO, Ken Moelis. The agreement gave Moelis extensive pre-approval rights over the Company's board of directors' decisions, the ability to select a majority of board members, and the power to determine the composition of any board committee. The plaintiff argued that these provisions violated Section 141(a) of the Delaware General Corporation Law (DGCL), which mandates that the business and affairs of a corporation be managed by or under the direction of a board of directors, except as otherwise provided in the DGCL or in the corporation's certificate of incorporation.The Court of Chancery of the State of Delaware agreed with the plaintiff, holding that the Pre-Approval Requirements, the Board Composition Provisions, and the Committee Composition Provision in the Stockholder Agreement were facially invalid under Section 141(a) of the DGCL. The court found that these provisions effectively transferred the management of the corporation to Moelis, contrary to Section 141(a). The court reasoned that while Delaware law generally favors private ordering, the ability to contract is subject to the limitations of the DGCL, including Section 141(a). The court emphasized that a provision may be part of a corporation's internal governance arrangement, and thus subject to Section 141(a), even if it appears in a contract other than the corporation's charter or bylaws.However, the court found that certain provisions were not facially invalid, including Moelis’ right to designate a number of directors, the requirement for the Company to nominate Moelis’ designees, and the requirement for the Company to make reasonable efforts to enable Moelis’ designees to be elected and continue to serve. View "West Palm Beach Firefighters' Pension Fund v. Moelis & Company" on Justia Law

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Cobalt International Energy partnered with three Angolan companies to explore and produce oil and gas off the coast of West Africa. Later, the federal Securities and Exchange Commission announced it was investigating Cobalt for allegations of illegal payments to Angolan government officials and misrepresentation of the oil content of two of its exploratory wells. This led to a significant drop in Cobalt’s stock price and prompted a class action lawsuit from Cobalt's investors, led by GAMCO, a collection of investment funds that held Cobalt shares. Prior to these events, Cobalt had purchased multiple layers of liability insurance from a number of insurance companies, collectively referred to as the Insurers in this case. When the allegations surfaced, Cobalt notified the Insurers, who denied coverage on the grounds that Cobalt's notice was untimely and certain policy provisions excluded the claims from coverage.In 2017, Cobalt filed for bankruptcy and began settlement negotiations with GAMCO. Eventually, a settlement agreement was reached, which stipulated that Cobalt would pay a settlement amount of $220 million to GAMCO, but only from any insurance proceeds that might be recovered. Cobalt and GAMCO then jointly sought approval of the settlement from the federal court and the bankruptcy court, both of which granted approval.The Insurers then filed a petition for a writ of mandamus, arguing that the settlement agreement was not binding or admissible in the coverage litigation, that Cobalt had not suffered a "loss" under the policies, and that GAMCO could not sue the Insurers directly.The Supreme Court of Texas held that (1) Cobalt had suffered a “loss” under the policies because it was legally obligated to pay any recoverable insurance benefits to GAMCO, (2) GAMCO could assert claims directly against the Insurers, and (3) the settlement agreement was not binding or admissible in the coverage litigation to establish coverage or the amount of Cobalt’s loss. The court reasoned that the settlement was not the result of a "fully adversarial proceeding," as Cobalt bore no actual risk of liability for the damages agreed upon in the settlement. The court conditionally granted the Insurers' petition for a writ of mandamus in part, ordering the trial court to vacate its previous orders to the extent they relied on the holding that the settlement agreement was admissible and binding to establish coverage under the policies and the amount of any covered loss. View "IN RE ILLINOIS NATIONAL INSURANCE COMPANY" on Justia Law

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In this case heard by the United States Court of Appeals for the Sixth Circuit, the plaintiff, Marketing Displays International (MDI), sued the defendant, Brianna Shaw, for allegedly violating her one-year non-compete agreement when she left MDI and began working for another company. The district court granted a preliminary injunction, preventing Shaw from working for her new employer for one year. Shaw appealed this decision in January 2023. However, due to several deadline extensions requested by both parties, the briefing did not finish until January 2024. By that time, the one-year period of the injunction had already expired, rendering the appeal moot.Shaw argued that the appeal was not moot as a ruling would impact her ability to recover any damages, including reputational harm caused by the injunction, and MDI's ability to recover attorney fees. The court disagreed, stating that Shaw could not collect damages until a final judgment is in her favor, and MDI's right to attorney fees did not depend on the validity of the preliminary injunction.Shaw also requested the court to vacate the moot portion of the preliminary injunction. However, the court refused, stating that the injunction would not have any preclusive effect on future litigation and that Shaw contributed to the appeal's mootness by requesting deadline extensions.Therefore, the appeal was dismissed as moot, and the case was remanded back to the lower court for further proceedings. View "Marketing Displays International v. Shaw" on Justia Law

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The Supreme Court of Pennsylvania held that the Pennsylvania Interscholastic Athletic Association (PIAA) is subject to the Right to Know Law’s record-disclosure mandates. The PIAA is a non-profit corporation and voluntary-member organization which organizes interscholastic athletics and promotes uniform standards in interscholastic sports. In 2020, Simon Campbell, a private citizen, filed a records request under the Right to Know Law seeking eight categories of records from the PIAA. The PIAA objected, asserting it is not a Commonwealth authority or entity subject to the Right to Know Law, and noted its intent to litigate the issue. The court found that the inclusion of PIAA in the definition of a state-affiliated entity, a subset of the definition of a Commonwealth agency, indicates that the General Assembly intended to subject PIAA to the Right to Know Law's record-disclosure scheme. Furthermore, the court found that the General Assembly did not mean the phrase "Commonwealth entity" to be strictly limited to official government agencies. Instead, the Assembly intended the phrase to include organizations that perform some role associated with statewide governance. View "Pennsylvania Interscholastic Athletic Association, Inc. v. Campbell" on Justia Law

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In a dispute between two IT staffing firms, Vinculum, Inc. and Goli Technologies, LLC, the Supreme Court of Pennsylvania held that the trial court erred by not awarding attorney fees to Vinculum, as stipulated in their contract, after it found that Goli Technologies breached the contract. The court further held that the trial court did not err by limiting Vinculum's damages to the one-year non-compete period specified in the contract.The case originated from Goli Technologies' breach of a consulting agreement that contained a one-year non-compete provision. Vinculum sued for breach of contract, seeking both attorney fees and lost-profit damages. The trial court found for Vinculum but denied attorney fees and limited the award of damages to the one-year non-compete period. The Superior Court affirmed the trial court's decision.Reversing the Superior Court's decision regarding attorney fees, the Supreme Court held that the trial court should have awarded Vinculum attorney fees as stipulated in the contract. The court remanded the case to the trial court for a hearing to determine the reasonable amount of attorney fees to be awarded to Vinculum.Regarding the lost-profit damages, the Supreme Court agreed with the trial court and the Superior Court that Vinculum's damages were limited to the period of the non-compete clause. The court held that although damages beyond the non-compete period are not absolutely barred, Vinculum did not establish at trial that it suffered lost-profit damages extending beyond the non-compete period. Thus, the court affirmed the lower courts' decisions on this issue. View "Vinculum, Inc. v. Goli Technologies, LLC" on Justia Law

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In this case, Fieldwood Energy LLC, and its affiliates, who were previously among the largest oil and gas exploration and production companies operating in the Gulf of Mexico, filed for Chapter 11 bankruptcy in 2020 due to declining oil prices, the COVID–19 pandemic, and billions of dollars in decommissioning obligations. In the ensuing reorganization plan, some companies, referred to as the "Sureties", who had issued surety bonds to the debtors, were stripped of their subrogation rights. The Sureties appealed this loss in district court, which held their appeal to be statutorily and equitably moot. The Sureties appealed again to the United States Court of Appeals for the Fifth Circuit, contending that a recent Supreme Court decision altered the landscape around statutory mootness and that the district court treated Section 363(m) as jurisdictional. However, the appellate court affirmed the district court’s decision, concluding that the Supreme Court’s recent decision did not change the application of Section 363(m) in this case, the district court did not treat the statute as jurisdictional, and the Sureties’ failure to obtain a stay was fatal to their challenge of the bankruptcy sale. The court also determined that the provisions stripping the Sureties of their subrogation rights were integral to the sale of the Debtors’ assets, making the challenge on appeal statutorily moot. View "Swiss Re Corporate Solutions America Insurance Co. v. Fieldwood Energy III, L.L.C." on Justia Law

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In the Court of Chancery of the State of Delaware, the plaintiffs Dennis Palkon and Herbert Williamson, shareholders of TripAdvisor, Inc. and Liberty TripAdvisor Holdings, Inc., filed a lawsuit against the directors of the companies. The directors had resolved to convert the companies from Delaware corporations into Nevada corporations, a decision approved by controlling stockholder Gregory B. Maffei. The plaintiffs argued that Nevada law offers fewer litigation rights to stockholders and provides greater litigation protections to fiduciaries, alleging that the directors and Maffei approved the conversion to secure these protections for themselves.The defendants moved to dismiss the complaint, arguing that it failed to state a claim on which relief could be granted. The court denied the motion except regarding the plaintiffs' request for injunctive relief. The court held that the conversion constituted a self-interested transaction effectuated by a stockholder controller, and conferred a non-ratable benefit on the stockholder controller and the directors, triggering entire fairness review.The court found it reasonably conceivable that the conversion was not substantively fair, as the stockholders would hold a lesser set of litigation rights after the conversion. It also found it reasonably conceivable that the conversion was not procedurally fair, as the stockholder controller and the board did not implement any procedural protections. The court concluded that the plaintiffs had stated a claim on which relief can be granted. However, the court stated that it would not enjoin the companies from leaving Delaware, as other remedies, including money damages, could be adequate. View "Palkon v. Maffei" on Justia Law

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In 2016, Venezuela's state-owned oil company, Petróleos de Venezuela S.A. (PDVSA), offered a bond swap whereby its noteholders could exchange unsecured notes due in 2017 for new, secured notes due in 2020. PDVSA defaulted in 2019, and the National Assembly of Venezuela passed a resolution declaring the bond swap a "national public contract" requiring its approval under Article 150 of the Venezuelan Constitution. PDVSA, along with its subsidiaries PDVSA Petróleo S.A. and PDV Holding, Inc., initiated a lawsuit seeking a judgment declaring the 2020 Notes and their governing documents "invalid, illegal, null, and void ab initio, and thus unenforceable." The case was taken to the United States Court of Appeals for the Second Circuit, which certified three questions to the New York Court of Appeals.The New York Court of Appeals, in answering the first question, ruled that Venezuelan law governs the validity of the notes under Uniform Commercial Code § 8-110 (a) (1), which encompasses plaintiffs' arguments concerning whether the issuance of the notes was duly authorized by the Venezuelan National Assembly under the Venezuelan Constitution. However, New York law governs the transaction in all other respects, including the consequences if a security was "issued with a defect going to its validity." Given the court's answer to the first certified question, it did not answer the remaining questions. View "Petróleos de Venezuela S.A. v MUFG Union Bank, N.A." on Justia Law