Justia Business Law Opinion Summaries

In 2016, the board of directors of Facebook, Inc. (“Facebook”) voted in favor of a stock reclassification that would allow Mark Zuckerberg, Facebook’s controller, chairman, and chief executive officer, to sell most of his Facebook stock while maintaining voting control of the company. Zuckerberg proposed the Reclassification to allow him and his wife to fulfill a pledge to donate most of their wealth to philanthropic causes. With Zuckerberg casting the deciding votes, Facebook’s stockholders approved the Reclassification. Not long after, numerous stockholders filed lawsuits in the Delaware Court of Chancery, alleging that Facebook’s board of directors violated their fiduciary duties by negotiating and approving a purportedly one-sided deal that put Zuckerberg’s interests ahead of the company’s interests. The trial court consolidated more than a dozen of these lawsuits into a single class action. At Zuckerberg’s request and shortly before trial, Facebook withdrew the Reclassification and mooted the fiduciary-duty class action. Facebook spent more than $20 million defending against the class action and paid plaintiffs’ counsel more than $68 million in attorneys’ fees under the corporate benefit doctrine. Following the settlement, another Facebook stockholder, the United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Pension Fund (“Tri-State”), filed a derivative complaint, rehashing many of the allegations made in the prior class action but sought compensation for the money Facebook spent in connection with the prior class action. Tri-State pleaded that making a demand on Facebook's board was futile because the board’s negotiation and approval of the Reclassification was not a valid exercise of its business judgment and because a majority of the directors were beholden to Zuckerberg. Facebook and the other defendants moved to dismiss Tri-State’s complaint arguing Tri-State did not make demand or prove that demand was futile. The Court of Chancery dismissed Tri-State's complaint under Rule 23.1. Finding no reversible error in that judgment, the Delaware Supreme Court affirmed dismissal. View "United Food and Commercial Workers Union v. Zuckerberg, et al." on Justia Law

The Supreme Court denied the petition filed by NuVeda, LLC for a writ of prohibition and/or mandamus asking the Supreme Court to disqualify Judge Elizabeth Gonzalez from presiding over a contempt hearing and to order the Chief Judge of the Eighth Judicial District Court to randomly reassign that hearing to another judge, holding that NuVeda was not entitled to relief.In this business dispute, NuVeda moved for a change of judge thirty-seven days after the court set a date for a trial on NuVeda's alleged contempt. The district court denied the motion as untimely. NuVeda petitioned for extraordinary writ relief. The Supreme Court denied the relief, holding (1) motions for a change of judge under Nev. Rev. Stat. 22.030(3) must be made with reasonable promptness under the circumstances; and (2) the district court did not erroneously determine that the motion in this case was untimely. View "NuVeda, LLC v. Eighth Judicial District Court" on Justia Law

Plaintiff-appellant Cheryl Thurston was blind and used screen reader software to access the Internet and read website content. Defendant-respondent Omni Hotels Management Corporation (Omni) operated hotels and resorts. In November 2016, Thurston initiated this action against Omni, alleging that its website was not fully accessible by the blind and the visually impaired, in violation of the Unruh Civil Rights Act. By way of a special verdict, the jury rejected Thurston’s claim and found that she never intended to make a hotel reservation or ascertain Omni’s prices and accommodations for the purpose of making a hotel reservation. On appeal, Thurston contended the trial court erred as a matter of law: (1) by instructing the jury that her claim required a finding that she intended to make a hotel reservation; and (2) by including the word “purpose” in the special verdict form, which caused the jury to make a “factual finding as to [her] motivation for using or attempting to use [Omni’s] Website.” Finding no reversible error, the Court of Appeal affirmed the trial court. View "Thurston v. Omni Hotels Management Corporation" on Justia Law

Leonard sought the involuntary dissolution of the family business. After his brothers, Michael and Joseph, invoked their statutory right to buy Leonard’s interests in the business pursuant to a court-ordered appraisal, the parties stipulated to add five LLCs to the 14 entities that were already subject to the appraisal and buyout proceeding. The court confirmed a valuation of Leonard’s interests and issued an alternative decree ordering that Michael and Joseph had to pay the appraised amount by a certain date and that, if they did not, the entities would be wound up and dissolved. Michael and Joseph did not pay the buyout amount. The court proceeded to wind up and dissolve the business, including the five additional LLCs. Meanwhile, Leonard proceeded on a claim for breach of fiduciary duty; the court awarded Leonard compensatory and punitive damages.Michael and Joseph argued the alternative decree to wind up and dissolve the business and the “follow-up" orders were void because the trial court lacked jurisdiction to dissolve the five LLCs. The court of appeal affirmed the order of dissolution but reversed the award of damages for breach of fiduciary duty. The trial court had fundamental jurisdiction; Michael and Joseph are estopped from collaterally attacking the alternative decree. Leonard lacked standing to assert breach of fiduciary duty; that cause of action was derivative, not individual. View "Schrage v. Schrage" on Justia Law

Bernice filed an action for the involuntary dissolution of an LLC. Her sisters, Arlene, Caroline, and Diana owned equal shares. Caroline and Diana elected to purchase Bernice’s and Arlene’s interests pursuant to Corporations Code section 17707.03. They stipulated to staying the dissolution action and appointing three appraisers. The LLC’s sole asset was a single-story industrial warehouse in San Gabriel, which had been appraised at $3 million in March 2018. Its tenant's five-year lease term was set to expire in 2021. The appraisers worked separately and reached different valuations. The court instructed the appraisers to review their respective reports and confer.The appraisers submitted a joint final report, establishing a net asset value of $831,973 for a 25 percent interest in the LLC, and stating “the value should be $623,979 after the application of a 27% discount applicable to a minority interest. The court ordered an additional deduction of $2,025 for reimbursement of appraisal fees and set a final buyout price of $621,954. The court of appeal affirmed, rejecting arguments that instructing the appraisers to review each other’s reports and confer did not comply with the statutory procedures; that the court improperly discounted the fair market value; and that the court improperly failed to account for mismanagement allegations. View "Cheng v. Coastal L.B. Associates, LLC" on Justia Law

In March 2020, the Governor of Ohio declared a state of emergency in connection with the COVID-19 pandemic. A few days later, the Director of the Ohio Department of Health ordered restaurants across the state to close their doors to in-person diners, forcing Santosuossos restaurant in Medina to halt ordinary operations. Although the closure order permitted restaurants to offer takeout services, in-person dining generates the substantial majority of Santosuossos’s revenue.” The restaurant sustained significant losses and laid-off employees. The restaurant filed a claim with Acuity, seeking recovery under its commercial property insurance policy. After Acuity denied coverage, the owner filed suit.The Sixth Circuit affirmed the dismissal of the suit. The policy covers business interruption “caused by direct physical loss of or damage to property.” The cause of the suspension of operations—the prohibition on in-person dining—did not arise from a physical loss of property or physical damage to it. The court also noted policy exclusions for “loss or damage caused directly or indirectly by . . . [a]ny virus . . . capable of inducing physical distress, illness or disease” and for “loss or damage caused directly or indirectly by [ordinance or law] . . . [r]egulating the construction, use or repair of any property.” View "Santo's Italian Cafe LLC v. Acuity Insurance Co." on Justia Law

In a case of first impression, the Pennsylvania Supreme Court granted review to determine whether the Commonwealth Court properly calculated the “cost” of steel products under the Steel Products Procurement Act (“Steel Act” or “the Act”), which required that “75% of the cost of the articles, materials and supplies [of a steel product] have been mined, produced or manufactured” in the United States. G. M. McCrossin, Inc. (“McCrossin”), a contracting and construction management firm, served as the general contractor for the Lycoming County Water and Sewer Authority (“Authority”) on a project known as the Montoursville Regional Sewer System Waste Water Treatment Plan, Phase I Upgrade (“Project”). In July 2011, McCrossin entered into an agreement with the Authority to supply eight air blower assemblies, which move air from one area to another inside the waste treatment facility. United Blower, Inc. (“UBI”), became a subcontractor on the Project. UBI was to supply the eight blowers required by the original specifications and was to replace the three digestive blowers as required by a change order. UBI prepared a submittal for the blowers which McCrossin in turn submitted to the Authority’s Project engineer, Brinjac Engineering (“Brinjac”). As part of the submittal, McCrossin provided Brinjac and the Authority with a form, which verified that 75% of the cost of the blowers was attributable to articles, materials, and supplies (“AMSs”) that were mined, produced, or manufactured in the United States. The total amount McCrossin paid UBI for the blower assemblies and digestive blowers was $239,800. The amount paid by the Authority to McCrossin for these items was $243,505. Authority employees began to question whether McCrossin and UBI provided products that complied with the Steel Act. The Supreme Court held the Commonwealth Court improperly calculated the cost of the steel products at issue, thereby reversing and remanding for further proceedings. View "United Blower, et al. v Lycoming Water & Sewer" on Justia Law

Petitioners Whitman Operating Co., LLC d/b/a Camp Walt Whitman, Wicosuta Operating Co., LLC d/b/a Camp Wicosuta, and Winaukee Operating Co., LLC d/b/a Camp Winaukee (collectively, the Camps), challenged a decision of respondent the Governor’s Office for Emergency Relief and Recovery (the Office for Emergency Relief), to deny their applications for money from the New Hampshire General Assistance and Preservation (GAP) Fund. In July 2020, the Governor authorized the allocation and expenditure of $30 million of CARES Act funds for the GAP Fund “to provide emergency financial relief to New Hampshire businesses and nonprofit organizations impacted by the COVID-19 pandemic.” The Camps applied for GAP funding at the end of July 2020. Their applications were denied on September 10, 2020. The form letters notifying the Camps that their applications had been denied stated that “having high liquid assets both personal and business” was one of “[t]he most common reasons” for denying an application. The Camps argued: (1) denying their applications violated their state and federal constitutional rights to equal protection; and (2) the Office for Emergency Relief’s decision deprived them of their state and federal rights to procedural and substantive due process. Finding no deprivation of petitioners' rights, the New Hampshire Supreme Court affirmed the Office for Emergency Relief. View "Petition of Whitman Operating Co., LLC d/b/a Camp Walt Whitman et al." on Justia Law

The issue presented from this interlocutory appeal of a Court of Chancery order holding that Appellees/Cross-Appellants, former stockholders of TerraForm Power, Inc. (“TerraForm”), had direct standing to challenge TerraForm’s 2018 private placement of common stock to Appellant/Cross-Appellees Brookfield Asset Management, Inc. and its affiliates, a controlling stockholder, for allegedly inadequate consideration. The trial court held that Plaintiffs did not state direct claims under Tooley v. Donaldson, Lufkin & Jennette, Inc., but did state direct claims predicated on a factual paradigm “strikingly similar” to that of Gentile v. Rossette, and that Gentile was controlling here. Appellants contended Gentile was inconsistent with Tooley, and that the Delaware Supreme Court’s decision in Gentile created confusion in the law and therefore ought to be overruled. Having engaged in a "full and fair presentation and searching inquiry has been made of the justifications for such judicial action," the Supreme Court overruled Gentile. Accordingly, the Court of Chancery's decision was reversed, but not because the Court of Chancery erred, but rather, because the Vice Chancellor correctly applied the law as it existed, recognizing that the claims were exclusively derivative under Tooley, and that he was bound by Gentile. View "Brookfield Asset Management, Inc., v. Rosson" on Justia Law

Stergiadis, Dimas, and Theo formed 1600 South LLC, executed an operating agreement, purchased land on which to build a fruit market, and began construction. The 2008 recession stopped construction and eventually led to the LLC’s 2009 dissolution. The partners disagreed about whether they impliedly agreed to equalize their capital contributions. The operating agreement provided that the three each held a one-third membership interest in the LLC; each member agreed to make an initial capital contribution on the date of execution but the amount was left blank. In 2008 Stergiadis sued Dimas in state court seeking to equalize the capital contributions. Dimas filed for bankruptcy, triggering the automatic stay. Dimas ultimately filed seven such petitions and received a discharge in 2016. The U.S. Trustee moved to reopen the bankruptcy to recover the value of an undisclosed property. The bankruptcy court agreed. Stergiadis filed a proof of claim in Dimas’s reopened bankruptcy seeking the same amount he was seeking in state court. The partners disputed the amounts of their respective contributions.The bankruptcy court allowed Stergiadis’s claim, awarding $618,974, finding that the members had an implied equalization agreement. The district court and Seventh Circuit affirmed, rejecting an argument that the LLC’s operating agreement precluded an implied equalization contract. The bankruptcy court properly relied on extrinsic evidence in finding such a contract. View "Dimas v. Stergiadis" on Justia Law