Justia Business Law Opinion Summaries

A Delaware corporation issued a proxy statement that misstated the voting standard for approving a charter amendment to increase its authorized shares of common stock. The proxy statement indicated that the amendment would pass if more shares voted for it than against it, applying a votes-cast standard. The corporation’s charter, however, states that an amendment requires approval by a majority of the voting power of all outstanding shares. The plaintiff argued that the amendment needed approval by a majority of the voting power of all outstanding shares, while the defendants relied on Section 242(d) of the Delaware General Corporation Law, which they claimed imposed the votes-cast standard.The plaintiff sought a preliminary injunction to prevent the corporation from proceeding with its stockholder meeting unless the proxy statement was corrected to reflect the need for approval from a majority of the outstanding shares. The defendants cross-moved for summary judgment, arguing that the votes-cast standard applied.The Court of Chancery of the State of Delaware reviewed the case. The court found that both the plaintiff’s and defendants’ interpretations of Section 242(d) were reasonable, creating ambiguity. The court examined extrinsic evidence, including legislative history and public policy considerations, to resolve the ambiguity. The court concluded that the Single Vote Provision in the corporation’s charter, which closely tracked the Class Vote Opt-Out, did not trigger a Majority-of-the-Outstanding Requirement. Therefore, the correct voting standard for the proposed amendment was the Majority-of-the-Votes-Cast Standard.The court granted the defendants’ motion for summary judgment and denied the plaintiff’s motion for a preliminary injunction. The court’s decision emphasized the intent to make it easier for corporations to increase their authorized shares, aligning with the public policy goal behind the 2023 amendments to the Delaware General Corporation Law. View "Salama v. Simon" on Justia Law

Plaintiff and her partner, owners of Health Hero Farm LLC, sought to buy out a local farming family from their partnership. During this period, they befriended the defendant, a local auto-repair shop owner with a small farm. They discussed forming a partnership with him, and plaintiff represented to the Vermont Land Trust that they were partnering with the defendant to secure approval for the buyout. Plaintiff and defendant agreed to purchase Galloway cattle, with plaintiff advancing the funds. Plaintiff insisted on a written agreement, but defendant preferred a handshake deal. Eventually, defendant signed a promissory note without reading it, which included an attorney’s-fees provision.The Superior Court, Grand Isle Unit, Civil Division, held a bench trial and concluded that the promissory note did not accurately reflect an agreement between the parties. The court found that the note was a contract of adhesion and awarded plaintiff damages and prejudgment interest under a theory of unjust enrichment, rather than enforcing the promissory note.The Vermont Supreme Court reviewed the case and held that the promissory note was unambiguous and enforceable according to its terms. The court found that defendant’s failure to read the note before signing it did not constitute a defense to enforcement. The court also determined that the note was not a contract of adhesion and was not unconscionable. The Supreme Court reversed the trial court’s decision and remanded the case for further proceedings consistent with its opinion. View "Falcao v. Richardson" on Justia Law

Alpine Securities Corporation, a securities broker-dealer and member of the Financial Industry Regulatory Authority (FINRA), faced sanctions from FINRA in 2022 for violating its rules. FINRA imposed a cease-and-desist order and sought to expel Alpine from membership. Alpine challenged the constitutionality of FINRA in federal court, arguing that FINRA's expedited expulsion process violated the private nondelegation doctrine and the Appointments Clause.The United States District Court for the District of Columbia denied Alpine's request for a preliminary injunction to halt FINRA's expedited proceeding. The court held that FINRA is a private entity, not subject to the Appointments Clause, and that the SEC's ability to review FINRA's decisions satisfied the private nondelegation doctrine.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. The court found that Alpine demonstrated a likelihood of success on its private nondelegation claim, as FINRA's expulsion orders take effect immediately without prior SEC review, effectively barring Alpine from the securities industry. The court held that this lack of governmental oversight likely violates the private nondelegation doctrine. The court also found that Alpine faced irreparable harm if expelled before SEC review, as it would be forced out of business.The court reversed the district court's denial of a preliminary injunction, instructing it to enjoin FINRA from expelling Alpine until the SEC reviews any expulsion order or the time for Alpine to seek SEC review lapses. However, the court did not grant a preliminary injunction on Alpine's Appointments Clause claims, as Alpine did not demonstrate irreparable harm from participating in FINRA's expedited proceeding itself. The case was remanded for further proceedings consistent with the appellate court's findings. View "Alpine Securities Corporation v. Financial Industry Regulatory Authority, Inc." on Justia Law

Two Massachusetts-based Volvo dealers filed a lawsuit against Volvo Car USA, Volvo Car Financial Services, and Fidelity Warranty Services, alleging violations of Massachusetts General Laws Chapter 93B. The dispute centers on Volvo-branded Prepaid Maintenance Program (PPM) contracts, which allow customers to prepay for future maintenance services at a discounted rate. Fidelity administers these contracts, which the dealers sell to their customers. The dealers claimed that the defendants were underpaying them for the parts and labor costs incurred in servicing these PPM contracts.The United States District Court for the District of Massachusetts heard cross-motions for summary judgment from both parties. The district court granted summary judgment in favor of the defendants, concluding that entities like Fidelity are not regulated by the relevant provisions of Chapter 93B. The court denied the dealers' motion for summary judgment, leading the dealers to appeal the decision.The United States Court of Appeals for the First Circuit reviewed the case and affirmed the district court's decision, but for a different reason. The appellate court held that the dealers' sale and service of the Volvo PPM are not franchise obligations under Chapter 93B. The court found that the Retailer Agreement between the dealers and Volvo USA did not obligate the dealers to sell or service the Volvo PPM. The court also noted that the dealers had the discretion to sell various financial products, including the Volvo PPM, and that servicing the PPM was not a material term of the Retailer Agreement. Therefore, Chapter 93B did not require Fidelity to reimburse the dealers at the statutory rates. View "Colony Place South, Inc. v. Volvo Car USA, LLC" on Justia Law

Northstar Center, LLC filed a lawsuit against Lukenbill Family Partnership, LLLP, and Tundra Properties, LLC, alleging breach of contract and intentional interference with contract. Lukenbill had initially agreed to sell a 120-acre parcel to Templeton Enterprises, LLC, which later assigned its rights to Northstar. However, Lukenbill sold the property to Tundra instead. Northstar claimed Lukenbill breached their agreement, and Tundra intentionally interfered with the contract. Lukenbill sought indemnification from Tundra, and Tundra counterclaimed for breach of warranty deed against Lukenbill.The District Court of Williams County granted summary judgment in favor of Northstar on its breach of contract and intentional interference claims, and in favor of Lukenbill on its indemnification claim against Tundra. The court denied Tundra’s summary judgment motion on its breach of warranty claim against Lukenbill, concluding Tundra did not adequately brief the issue.The North Dakota Supreme Court reviewed the case and found that the district court erred in granting summary judgment for Northstar on its breach of contract and intentional interference claims, as genuine issues of material fact existed. The court also found that the district court erred in granting summary judgment for Lukenbill on its indemnification claim against Tundra. However, the Supreme Court affirmed the district court’s dismissal of Tundra’s breach of warranty claim against Lukenbill, as Tundra did not challenge the dismissal on the grounds that it could not maintain the claim without a certificate of authority to transact business in North Dakota.The North Dakota Supreme Court affirmed in part, reversed in part, and remanded the case for further proceedings consistent with its opinion. View "Northstar Center v. Lukenbill Family Partnership" on Justia Law

Mariusz Klin, the lead plaintiff, purchased Cloudera stock between its initial public offering (IPO) and a subsequent price drop following the company's announcement of negative quarterly earnings. Klin alleged that Cloudera, Inc. and its officers and directors made materially false and misleading statements and omissions about the technical capabilities of its products, particularly regarding their "cloud-native" nature.The United States District Court for the Northern District of California dismissed Klin's first amended complaint for failure to state a claim, noting that Klin did not adequately explain what "cloud-native" meant at the time the statements were made. The court allowed Klin to file a second amended complaint, instructing him to provide a contemporaneous definition of "cloud-native" and explain why Cloudera's statements were false when made. Klin's second amended complaint was also dismissed for failing to meet the heightened pleading standards required for fraud claims, as it did not provide sufficient factual support for the definitions of the cloud-related terms.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court's dismissal. The appellate court held that Klin did not adequately plead the falsity of Cloudera's statements with the particularity required under Rule 9(b) and the Private Securities Litigation Reform Act (PSLRA). The court noted that Klin's definitions of cloud-related terms lacked evidentiary support and that the cited blog post did not substantiate his claims. Additionally, the court found that Klin's reliance on later statements and product developments did not establish the falsity of the earlier statements.The Ninth Circuit also affirmed the district court's decision to deny further leave to amend, concluding that additional amendments would be futile. Klin had not identified specific facts that could remedy the deficiencies in his complaint, and the court saw no reason to believe that another amendment would succeed. The court's decision to dismiss the case with prejudice was upheld. View "IN RE: MARIUSZ KLIN V. CLOUDERA, INC." on Justia Law

Les and Gretchen Howell invested in a silver-trading scheme called the Silver Pool, operated by Gaylen Rust through Rust Rare Coin. Les invested about $1.2 million and received $3.2 million in profits, while Gretchen invested $96,450 but lost $74,450. Les used his profits to buy land and build a house in Kingman, Arizona, and made Gretchen a joint tenant. The Silver Pool was later exposed as a Ponzi scheme, and the Commodity Futures Trading Commission (CFTC) brought an enforcement action against Rust. Jonathan O. Hafen was appointed as the receiver to recover assets fraudulently transferred through the scheme.The United States District Court for the District of Utah granted Hafen summary judgment against Les and Gretchen on fraudulent-transfer claims under Utah’s Uniform Voidable Transactions Act (UVTA), ordering them to return Les’s $3.2 million profit. The court also awarded Hafen prejudgment interest at a 5% rate. The Howells sought reconsideration and clarification of the judgment, particularly regarding Gretchen’s liability. The district court clarified that Gretchen was liable for $1.5 million, representing half of the $3 million Les invested in the Kingman property.The United States Court of Appeals for the Tenth Circuit reviewed the case. The court affirmed the district court’s application of the Ponzi presumption under the UVTA and the reliance on expert reports. However, it found that the district court erred in calculating the judgment against Gretchen. The appellate court held that the judgment should reflect the value of Gretchen’s interest in the Kingman property at the time of transfer, not the amount Les invested. The case was reversed and remanded for further proceedings to determine the correct amount of the judgment against Gretchen. The court otherwise affirmed the district court’s rulings. View "Hafen v. Howell" on Justia Law

D.A. Davidson & Co. initiated an interpleader action to resolve a dispute over funds held in an investment account for Whitefish Masonic Lodge 64. The Grand Lodge of Ancient Free and Accepted Masons of Montana revoked Whitefish Lodge's charter and claimed the funds. Donald Slaybaugh, a member of Whitefish Lodge, contested the revocation and the transfer of funds, arguing that the Grand Lodge did not follow proper procedures.The Eleventh Judicial District Court, Flathead County, granted summary judgment in favor of the Grand Lodge, dismissing Slaybaugh's cross claims. The court determined that Slaybaugh lacked standing to bring claims against the Grand Lodge on behalf of Whitefish Lodge or in his individual capacity. The court found that Whitefish Lodge, having had its charter revoked, no longer existed as a legal entity capable of bringing claims. Additionally, the court concluded that Slaybaugh did not have the authority to act on behalf of the Lodge, as he was not an elected officer and his previous authority to oversee the investment account had been revoked.The Supreme Court of the State of Montana affirmed the District Court's decision. The court held that Slaybaugh did not have standing to bring claims on behalf of Whitefish Lodge because the Lodge was dissolved and could not appear in litigation. The court also rejected Slaybaugh's argument that he had standing as a fiduciary or under a derivative action, noting that he did not meet the pleading requirements for a derivative action and that his fiduciary authority had been revoked. Finally, the court found no evidence to support claims of fraud or arbitrary action by the Grand Lodge in revoking the Lodge's charter. View "D.A. Davidson v. Slaybaugh" on Justia Law

Local Puerto Rico merchants brought unfair competition claims against major big-box retailers, alleging that during the COVID-19 pandemic, Costco Wholesale Corp. and Wal-Mart Puerto Rico, Inc. violated executive orders limiting sales to essential goods. The plaintiffs claimed that the defendants continued to sell non-essential items, capturing sales that would have otherwise gone to local retailers, and sought damages for lost sales during the 72-day period the orders were in effect.The case was initially filed as a putative class action in Puerto Rico's Court of First Instance. Costco removed the case to federal district court under the Class Action Fairness Act (CAFA). The district court denied Costco's motion to sever the claims against it and also denied the plaintiffs' motion to remand the case to state court. The district court dismissed most of the plaintiffs' claims but allowed the unfair competition claim to proceed. However, it later denied class certification and granted summary judgment for the defendants, concluding that the executive orders did not create an enforceable duty on the part of Costco and Wal-Mart.The United States Court of Appeals for the First Circuit reviewed the case on jurisdictional grounds. The court held that CAFA jurisdiction is not lost when a district court denies class certification. It also held that CAFA's "home state" exception did not apply because Costco, a non-local defendant, was a primary defendant. However, the court found that CAFA's "local controversy" exception applied because the conduct of Wal-Mart Puerto Rico, a local defendant, formed a significant basis for the claims. The court concluded that the district court did not abuse its discretion in denying Costco's motion to sever and determined that the entire case should be remanded to the Puerto Rico courts. The court reversed the district court's denial of the motion to remand, vacated the judgment on the merits for lack of jurisdiction, and instructed the district court to remand the case to the Puerto Rico courts. View "Kress Stores of Puerto Rico, Inc. v. Wal-Mart Puerto Rico, Inc." on Justia Law

A Delaware corporation's board of directors recommended reincorporating the corporation as a Nevada corporation through a conversion under Section 266 of the Delaware General Corporation Law (DGCL). The corporation's CEO controls approximately 49% of the voting power, making the conversion likely to receive the necessary majority vote. However, the corporation's certificate of incorporation requires a 66 2/3% supermajority vote to amend or repeal certain provisions. A stockholder argued that the conversion should be subject to this higher voting requirement because it would result in amendments inconsistent with the certificate's protected provisions.The Court of Chancery of the State of Delaware reviewed the case. The plaintiff sought to enjoin the conversion unless the supermajority vote requirement was applied and additional disclosures were made. The defendants argued that the conversion was not subject to the supermajority vote requirement, relying on the doctrine of independent legal significance and relevant case law. Both parties moved for summary judgment.The court concluded that the supermajority vote requirement in the certificate of incorporation did not apply to the conversion under Section 266. The court emphasized that the doctrine of independent legal significance, as established in Warner Communications Inc. v. Chris-Craft Industries, Inc. and subsequent cases, requires clear and express language to extend special voting rights beyond actions taken under Section 242 of the DGCL. The court found that the language in the certificate did not meet this standard and, therefore, the conversion was subject only to the majority vote requirement under Section 266. The court granted the defendants' motion for summary judgment and denied the plaintiff's motion. The court also entered a partial final judgment under Rule 54(b) to allow for an expedited appeal. View "Gunderson v. The Trade Desk, Inc." on Justia Law