Justia Business Law Opinion Summaries

A former CEO of a Delaware corporation, who also founded and controlled the company, entered into a series of employment agreements and amendments with the company’s board. These agreements provided him with substantial severance benefits, including a large special payment of restricted stock units and cash, under specific termination conditions—such as his removal from board leadership or a change in board composition. The agreements also included a forum selection clause requiring that disputes “arising out of or relating to” the contract be litigated exclusively in the Superior Court of California. After an activist hedge fund succeeded in electing new directors and the CEO lost control, he resigned and claimed entitlement to the severance and special payment. He initiated litigation in California to enforce his rights under the agreement.Meanwhile, the company’s newly reconstituted board deemed the CEO terminated for cause and filed suit in the Delaware Court of Chancery. The company sought to invalidate the employment agreements, alleging they were the product of the CEO’s breaches of fiduciary duty and that their terms improperly entrenched his control and penalized stockholders. The company argued Delaware was the proper forum based on its bylaws and the nature of the claims.The Delaware Court of Chancery reviewed the case. The court held that, because of the recently enacted Section 122(18) of the Delaware General Corporation Law, the forum selection clause in a governance agreement (such as this employment agreement with a controller/stockholder) is enforceable and can validly require internal affairs and fiduciary duty claims relating to the agreement to be litigated outside Delaware. The court found the agreement was covered by Section 122(18) and that all claims “arose out of or related to” the agreement. The court granted the CEO’s motion to dismiss, holding that venue was proper only in California. View "Masimo Corporation v. Kiani" on Justia Law

Shahriyar Bolandian was convicted of insider trading based on allegations that he traded on nonpublic information regarding the mergers of two companies, information allegedly obtained from a friend, Ashish Aggarwal, who worked at J.P. Morgan. Bolandian executed trades in the stocks of PLX Technologies and ExactTarget before their respective acquisitions, ultimately earning substantial profits. These trades occurred while Aggarwal, though not assigned to the deals, worked in the relevant banking group. The case revolved around whether Aggarwal had improperly shared confidential information, and whether Bolandian knowingly traded on it.Initially, the United States District Court for the Central District of California severed Aggarwal’s trial from that of Bolandian and another co-defendant, Sadigh, due to the risk of antagonistic defenses. Aggarwal was ultimately acquitted by a jury. Afterward, a superseding indictment charged only Bolandian and Sadigh, and eventually Bolandian alone proceeded to trial. During Bolandian’s trial, a juror (Juror No. 6) expressed uncertainty about his ability to be impartial due to a family connection to J.P. Morgan. The district court questioned Juror No. 6 briefly, but allowed him to remain on the jury after both parties did not object.The United States Court of Appeals for the Ninth Circuit reviewed Bolandian’s conviction and focused on the issue of juror bias. The court held that the district court failed in its independent duty to investigate credible allegations of juror bias after Juror No. 6 expressed doubt about his impartiality. The panel concluded that defense counsel’s agreement to keep Juror No. 6 did not waive Bolandian’s right to challenge for bias, as a proper investigation is a prerequisite to waiver. The Ninth Circuit found plain error, vacated Bolandian’s conviction, and remanded for a new trial. View "USA V. BOLANDIAN" on Justia Law

A business dispute arose when an employee hired to supervise construction projects for a company was found to be diverting workers, who were being paid by the company, to work on personal construction ventures organized jointly with others. This scheme was uncovered after discrepancies in worksite attendance were noticed and investigated. The company then sued the parties involved for theft of services, tortious interference, and unjust enrichment, alleging that the defendants benefited from the misappropriated labor. During the litigation, it was discovered that some potentially relevant business records and emails were unavailable, leading to further disputes about whether these materials were intentionally withheld to prevent discovery.Following a jury trial in the 68th District Court of Dallas County, the jury found in favor of the plaintiff company and awarded damages. The defendants, Copper Creek Distributors, Inc. and Escoffie, appealed to the Court of Appeals for the Fifth District of Texas. On appeal, they raised several issues, including challenges to the sufficiency and admissibility of damages evidence, liability findings, and procedural matters. However, the court of appeals only addressed the trial court’s decision to give a spoliation instruction to the jury, found it to be erroneous and harmful, and remanded for a new trial, without considering other appellate points that could warrant rendering judgment for the appellants.The Supreme Court of Texas reviewed the case and held that appellate courts must address issues that could require rendition before remanding for a new trial. The court concluded that the court of appeals erred by not first considering other grounds that might have fully resolved the case. The Supreme Court also found the harm analysis regarding the spoliation instruction inadequate. Therefore, it reversed the court of appeals’ judgment and remanded the case for further proceedings consistent with its opinion. View "VALK v. COPPER CREEK DISTRIBUTORS, INC." on Justia Law

A group of three major construction firms formed a joint venture to undertake Florida’s largest infrastructure project: the reconstruction and expansion of a major interstate. The venture’s contractual and financial structure was complicated, involving a public-private partnership in which a concessionaire entity financed the project, hired the joint venture to perform the actual construction, and would gain long-term maintenance rights. One member of the joint venture, aware of mounting losses, proposed a strategy for the venture to attempt to exit the project or use the threat of termination as leverage in negotiations. This strategy relied on a contested interpretation of the contract and was opposed by the other members, who considered it dangerously speculative and likely to cause greater harm.As losses increased, the dissenting member stopped contributing required capital to the joint venture, accusing the managing partner of breaching its fiduciary duties by refusing to pursue the proposed termination strategy, and alleging a conflict of interest due to overlapping ownership between the managing partner and the concessionaire. The other members responded by contributing additional funds to keep the project solvent and countersued for breach of contract and indemnity.The United States District Court for the Middle District of Florida held a bench trial and found that the managing partner had not breached any fiduciary duty or acted with gross negligence. The court also found that the dissenting member had materially breached the joint venture agreement by refusing to pay its share of capital calls, and ordered it to reimburse the other members, including prejudgment interest and attorneys’ fees.On appeal, the United States Court of Appeals for the Eleventh Circuit affirmed. The court held that the managing partner had acted in the best interest of the joint venture by not pursuing the proposed termination, and that there was no actionable conflict of interest under Florida partnership law. The court also concluded that the dissenting member’s failure to fund was a material breach, entitling the other members to indemnification and statutory prejudgment interest. View "The Lane Construction Corporation v. Skanska USA Civil Southeast, Inc." on Justia Law

An Iranian citizen, living in the United States, held a credit card account with a large financial institution. Due to United States sanctions against Iran, federal regulations prohibit U.S. banks from providing services to accounts of individuals ordinarily resident in Iran, unless those individuals are not located in Iran. The bank had a compliance policy requiring account holders from such sanctioned countries to regularly provide documents showing they were not residing in those countries. The plaintiff, subject to this policy, submitted various documents as proof of U.S. residency. After the bank mistakenly treated one of his residency documents as temporary rather than permanent, it closed his account when he failed to submit additional documentation.The plaintiff sued in state court, alleging violations of federal and state anti-discrimination and consumer protection statutes, including 42 U.S.C. § 1981, the Equal Credit Opportunity Act, the California Unruh Civil Rights Act, and the California Unfair Competition Law. The defendant bank removed the case to the United States District Court for the Southern District of California. The district court granted summary judgment for the bank on all claims except for an ECOA notice claim and a related UCL claim, both of which the plaintiff later voluntarily dismissed. The plaintiff then appealed.The United States Court of Appeals for the Ninth Circuit held that the International Emergency Economic Powers Act’s liability shield provision immunizes the bank from liability for good faith actions taken in connection with compliance with sanctions regulations, even if such actions are not strictly compelled by the regulations. The court found that the bank’s policy was consistent with federal guidance and that the plaintiff failed to show a genuine dispute of material fact regarding the bank’s good faith. The Ninth Circuit affirmed the district court’s judgment in favor of the bank. View "NIA V. BANK OF AMERICA, N.A." on Justia Law

A Delaware corporation specializing in antenna measurement systems was majority-owned by a parent company, which controlled the board and imposed a services agreement that disproportionately allocated expenses to the subsidiary. An investment fund, having previously rejected buyout offers, became a vocal minority stockholder. In 2018, after a controversial squeeze-out merger at $3.30 per share—approved without effective minority protections—a third-party expressed interest in buying the parent at a much higher valuation, but later withdrew due to concerns over the parent’s transfer pricing practices. The merger closed at a valuation much lower than that suggested by the later private equity investment.A minority stockholder initially filed suit in the Court of Chancery of the State of Delaware, alleging breaches of fiduciary duty related to the merger. The court denied a motion to dismiss, and the original plaintiff’s counsel negotiated a proposed $825,000 settlement. The investment fund objected, sought to replace the lead plaintiff and counsel, and ultimately succeeded after the original settlement was rejected and the fund posted security to protect other stockholders’ interests. The fund, with new counsel, filed an amended complaint, pursued broader discovery, and advanced new damages theories, including contesting the services agreement and relying on the arm’s-length valuation from the private equity transaction. The litigation efforts included multiple discovery motions, expert reports, and defeating dismissal attempts, culminating in a mediated settlement for $17.85 million—21.64 times the original settlement and reflecting a 235% premium over the deal price.The Court of Chancery of the State of Delaware, in the present opinion, held that the investment fund, as lead plaintiff, was entitled to an incentive award of $730,000. The court found that the award was justified based on the fund’s considerable time, effort, and resources expended, the significant benefit obtained for the class, and the absence of problematic incentives or conflicts. View "In re Orbit/FR, Inc. Stockholders Litig." on Justia Law

A manager of two limited liability companies, after significant ownership changes and internal conflict, was removed from his managerial role and asked to sell his shares. When he refused, other company members and the companies themselves sued him, initially over breach of the operating agreements. During litigation, they discovered that in 2017, he had secured a $275,000 loan against company real estate, transferred the proceeds to company accounts, and then paid off personal debts with the money without authorization or proper disclosure to his co-owners.The Elkhart Superior Court held a bench trial and found for the plaintiffs on claims including breach of fiduciary duty, unjust enrichment, and, importantly, under the Indiana Crime Victim’s Relief Act (CVRA) for criminal conversion. The court found that the defendant used company funds to pay personal obligations without authorization, constituting criminal conversion, and awarded treble damages, costs, and attorneys’ fees. On appeal, the Indiana Court of Appeals was divided. The majority concluded that because the funds were commingled, they did not qualify as “special chattel” and thus did not support a conversion claim, but affirmed treble damages under the CVRA on the theory of theft. A concurring judge disagreed with the special-chattel requirement and believed conversion had been established.The Indiana Supreme Court granted transfer, vacating the appellate opinion. The Court held that money need not be “special chattel” or segregated to support a criminal-conversion claim or a CVRA action. The statutory elements of conversion are sufficient, and the judicially created special-chattel requirement is not part of the criminal-conversion statute. The Court affirmed the trial court’s award of treble damages under the CVRA but directed the award to be made to the proper company victim. It also affirmed the findings on breach of fiduciary duty and unjust enrichment. View "Harper v. S&H Leasing LLC" on Justia Law

Branch Metrics, Inc. brought an antitrust action against Google, LLC, alleging violations of the Sherman Act based on documents uncovered in earlier litigation brought by the United States against Google. Branch Metrics claimed Google maintained monopoly power in online search and search advertising markets, using exclusive agreements that caused anticompetitive harm. The suit was filed in the Eastern District of Texas, although most relevant witnesses and evidence were located in California.Google responded by requesting a transfer of venue to the Northern District of California under 28 U.S.C. § 1404(a), arguing that it was clearly more convenient for parties and witnesses and that the sources of proof were located there. The United States District Court for the Eastern District of Texas permitted venue discovery but ultimately denied Google’s motion to transfer. The court found that certain private interest factors slightly favored transfer, while one public interest factor—administrative difficulties stemming from court congestion—weighed against transfer, and the rest of the factors were neutral.On mandamus review, the United States Court of Appeals for the Fifth Circuit found that the district court misapplied the law by placing undue weight on the court congestion factor, which Fifth Circuit precedent considers speculative and non-dispositive. The appellate court held that the district court erred by allowing that single factor to override all other factors, contrary to circuit authority. The Fifth Circuit also rejected Branch Metrics’ argument that the Clayton Act insulated its choice of venue from transfer. The court granted Google’s petition for a writ of mandamus and ordered the case transferred to the Northern District of California. View "In Re: Google" on Justia Law

A group of shareholders brought a class action against a telecommunications company and its executives, alleging violations of securities laws related to the company’s merger with another entity. The plaintiffs claimed that the registration statement and prospectus for the merger contained false statements and omitted material facts about illegal billing practices known as “cramming,” which they argued were widespread, known to senior management, and impacted the company’s financial performance. The amended complaint incorporated allegations and statements made by confidential witnesses and public filings from related lawsuits, as well as affidavits from other cases, all supporting the claim of pervasive cramming practices.Initially, the Boulder County District Court dismissed the complaint for failure to plead material misrepresentations or omissions with particularity and denied leave to amend. On appeal, the Colorado Court of Appeals affirmed in part but reversed the denial of leave to amend the omissions claim based on the cramming theory, instructing that any borrowed allegations must be pleaded as facts after reasonable inquiry as required by C.R.C.P. 11. After the plaintiff amended the complaint, the district court dismissed it again, concluding that the plaintiff’s counsel had not satisfied the requirement to conduct a reasonable inquiry, as the complaint relied on allegations from other lawsuits without direct verification from the original sources or witnesses.The Colorado Supreme Court, en banc, reviewed the case and affirmed the Court of Appeals’ reversal. The Supreme Court held that under C.R.C.P. 11(a), counsel must conduct a sufficient investigation to support allegations, at least on information and belief, but the extent of the required investigation is fact-dependent. Copying allegations from related complaints does not alone violate Rule 11 provided counsel’s inquiry is objectively reasonable in context. The Court found that the plaintiff’s counsel had met this standard and affirmed the judgment below. View "CenturyLink, Inc. v. Houser" on Justia Law

A group of farmers and farming entities brought suit against several manufacturers, wholesalers, and retailers of seeds and crop-protection chemicals, alleging that these defendants conspired to obscure pricing data for these “crop inputs.” The plaintiffs claimed that this conspiracy, which included a group boycott of electronic sales platforms and price-fixing activities, forced them to pay artificially high prices. They sought to represent a class of individuals who had purchased crop inputs from the defendants or their authorized retailers dating back to January 1, 2014. The plaintiffs asserted violations of the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act (RICO), and various state laws, seeking both damages and injunctive relief.After the cases were consolidated in the United States District Court for the Eastern District of Missouri, the defendants moved to dismiss the consolidated amended complaint. The district court granted the motion, finding that the plaintiffs failed to state a claim under the Sherman Act because they did not adequately allege parallel conduct among the defendants. The RICO claims were also dismissed with prejudice, and the court declined to exercise supplemental jurisdiction over the state law claims. The district court dismissed the antitrust claim with prejudice, noting that the plaintiffs had prior notice of the deficiencies and had multiple opportunities to amend.On appeal, the United States Court of Appeals for the Eighth Circuit reviewed the dismissal de novo and affirmed the district court’s judgment. The appellate court held that the plaintiffs failed to adequately plead parallel conduct or provide sufficient factual detail connecting specific defendants to particular acts. It concluded that the complaint’s group pleading and conclusory allegations did not meet the plausibility standard required to survive a motion to dismiss. The court also ruled that the dismissal with prejudice was proper given the plaintiffs’ repeated failures to cure the deficiencies. View "Duncan v. Bayer CropScience LP" on Justia Law