Justia Business Law Opinion Summaries
Standing Akimbo, LLC v. United States
The IRS conducted a civil audit of Peter Hermes, Kevin Desilet, Samantha Murphy, and John Murphy (collectively, the “Taxpayers”) to verify their tax liabilities for their medical- marijuana dispensary, Standing Akimbo, LLC. The IRS was investigating whether the Taxpayers had taken improper deductions for business expenses arising from a “trade or business” that “consists of trafficking in controlled substances.” Claiming to fear criminal prosecution, the Taxpayers declined to provide the audit information to the IRS. This left the IRS to seek the information elsewhere—it issued four summonses for plant reports, gross-sales reports and license information to the Colorado Department of Revenue’s Marijuana Enforcement Division (the “Enforcement Division”), which is the state entity responsible for regulating licensed marijuana sales. In Colorado federal district court, the Taxpayers filed a petition to quash the summonses. The government moved to dismiss the petition and to enforce the summonses. The district court granted the motion to dismiss and ordered the summonses enforced. After review, the Tenth Circuit concluded the Taxpayers failed to overcome the IRS' showing of good faith, and failed to establish that enforcing the summonses would constitute an abuse of process. View "Standing Akimbo, LLC v. United States" on Justia Law
Arkansas Teacher Retirement System v. Goldman Sachs Group, Inc.
Shareholders of Goldman filed a class action alleging that Goldman and several of its executives committed securities fraud by misrepresenting Goldman's freedom from, or ability to combat, conflicts of interest in its business practices. The district court certified a shareholder class, but the Second Circuit vacated the order in 2018. On remand, the district court certified the class once more. The court affirmed the district court's order on remand, holding that the district court correctly applied the inflation-maintenance theory. The court explained that the inflation-maintenance theory did not require proof of fraud-induced inflation, and that the district court applied the correct standard in concluding that Goldman's share price was inflated. The court also held that the district court did not abuse its discretion by holding that Goldman failed to rebut the Basic presumption by a preponderance of the evidence. View "Arkansas Teacher Retirement System v. Goldman Sachs Group, Inc." on Justia Law
SRM Group, Inc. v. Travelers Property Cas. Co. of America
Travelers Property Casualty Company of America (“Travelers”) filed suit against SRM Group, Inc. (“SRM”), seeking to recover unpaid premiums due under a workers’ compensation insurance policy. In response, SRM asserted counterclaims against Travelers for breach of contract, breach of duty of good faith and fair dealing, and attorney fees based on Travelers’ audit of SRM’s employee risk classifications and subsequent refusal to reclassify those employees, which resulted in a substantial retroactive increase in the premium. A jury awarded Travelers damages based on SRM's failure to pay some of the alleged increased premium due under the policy. However, the jury found that Travelers had also breached the contract and acted in bad faith in conducting the audit and failing to reclassify certain SRM employees. The issue this case presented for the Georgia Supreme Court's review centered on whether a counterclaimant asserting an independent compulsory counterclaim could seek attorney fees and litigation expenses under Georgia case law. The Supreme Court overruled Byers v. McGuire Properties, Inc, 679 SE2d 1 (2009), and Sponsler v. Sponsler, 699 SE2d 22 (2010). "Thus, a plaintiff-in-counterclaim asserting an independent claim may seek, along with that claim, attorney fees and litigation expenses under OCGA 13-6-11, regardless of whether the independent claim is permissive or compulsory." In this case, the Court reversed that part of the Court of Appeals' opinion that followed Byers. View "SRM Group, Inc. v. Travelers Property Cas. Co. of America" on Justia Law
Hegar v. Gulf Copper & Manufacturing Corp.
In this dispute over the amount of franchise tax owed by a taxpayer the Supreme Court reversed in part the judgment of the court of appeals reversing in part the trial court's judgment for the taxpayer, holding that, with respect to the taxpayer's inclusion of certain costs in its "cost of goods sold" (COGS) subtraction, the calculation method accepted by the trial court was improper, and the taxpayer was not entitled to include the costs in calculating its COGS subtraction. The Comptroller concluded that Gulf Copper and Manufacturing Corporation paid an insufficient amount of franchise taxes for the 2009 year. At issue was whether Gulf Copper could exclude certain payments from its revenue under Texas Tax Code 171.1011(g)(3) and include certain costs in its COGS subtraction under Texas Tax Code 171.1012. Gulf Copper paid additional taxes and sued to recover the disputed amount. The trial court rendered judgment in favor of Gulf Copper. The court of appeals reversed in part. The Supreme Court reversed in part, holding (1) the Comptroller incorrectly disallowed the revenue exclusion; (2) with regard to the COGS subtraction, the calculation method accepted by the trial court was improper; and (3) the taxpayer was not entitled to include costs under subsection 171.1012(i) in calculating its COGS subtraction. View "Hegar v. Gulf Copper & Manufacturing Corp." on Justia Law
Hegar v. American Multi-Cinema, Inc.
The Supreme Court reversed the decision of the court of appeals affirming the judgment of the trial court concluding that Tex. Tax Code 171.1012 permitted a movie theater to subtract exhibition costs as cost of goods sold, holding that film exhibitions are not tangible personal property that is sold, and therefore, the theater was not entitled to include exhibition-related costs in its cost of goods sold. The Comptroller disallowed the movie theater's subtraction of exhibition costs in calculating its franchise tax liability for 2008 and 2009. The theater paid the additional franchise taxes requested by the Comptroller and sued to recover the disputed amount, arguing that its exhibition costs were property subtracted as cost of goods sold (COGS). The trial court concluded that the theater's film exhibitions were tangible personal property and thus goods for sale in the ordinary course of the theater's business under section 171.1012. The court of appeals affirmed. The Supreme Court reversed, holding that section 171.1012 did not permit the movie theater to subtract is exhibition costs as COGS because no tangible personal property was transferred through the film exhibitions. View "Hegar v. American Multi-Cinema, Inc." on Justia Law
Sunstate Equipment Co. v. Hegar
The Supreme Court affirmed the judgment of the court of appeals affirming the Texas Comptroller's audit of Sunstate Equipment, a heavy construction equipment renal company, on the grounds that Sunstate was not entitled to subtract certain delivery and pick-up costs as cost of goods sold (COGS) under Tex. Tax Code 171.1012, holding that Sunstate was not entitled to the subtraction it claimed under either section 171.1012(k-1) nor section 171.1012(i). After the Comptroller assessed deficiencies, penalties and interest totaling $140,495 Sunstate brought suit for a refund. The district court ordered a full refund of the amount paid, including interest. The court of appeals reversed, concluding that Sunstate was not entitled to subtract costs under section 171.1012(k-1) and that section 171.1012(i) did not independently authorize the cost subtractions. The Supreme Court affirmed, holding that neither statutory provision authorized Sunstate to subtract its delivery and pick-up costs as COGS. View "Sunstate Equipment Co. v. Hegar" on Justia Law
Sonterra Capital Master Fund Ltd. v. UBS AG
The Second Circuit reversed the district court's dismissal of plaintiffs' Sherman Act, RICO Act, and common-law claims against defendants for lack of Article III standing. Plaintiffs are a group of investment funds and defendants are a collection of financial institutions. Plaintiffs' claims stemmed from a scheme to fix the benchmark interest rates used to price financial derivatives in the Yen currency market. The court held that plaintiffs alleged an injury in fact sufficient for Article III standing, because plaintiffs plausibly alleged that defendants' conduct caused them to suffer economic injury. In this case, plaintiffs alleged that they entered into financial agreements on unfavorable terms because defendants manipulated benchmark rates in their own favor. Accordingly, the court remanded for further proceedings. View "Sonterra Capital Master Fund Ltd. v. UBS AG" on Justia Law
Campbell Family Trust v. J.P. Morgan Investment Management, Inc.
The plaintiffs are shareholders in mutual funds. JPMIM is paid a fee for managing the Funds’ securities portfolio and researching potential investments. The plaintiffs sued under the Investment Company Act (ICA), 15 U.S.C. 80a-1, which allows mutual fund shareholders to bring a derivative suit against their fund’s investment adviser on behalf of their fund. The plaintiffs claimed that JPMIM charged excessive fees in violation of section 36(b), which imposes a fiduciary duty on advisers with respect to compensation for services. The Sixth Circuit affirmed summary judgment in favor of JPMIM. Under section 36(b), a shareholder must prove that the challenged fee “is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” The district court considered the relevant factors in making its determination: the nature, extent, and quality of the services provided by the adviser to the shareholders; the profitability of the mutual fund to the adviser; “fallout” benefits, such as indirect profits to the adviser; economies of scale achieved by the adviser as a result of growth in assets under the fund’s management and whether savings generated from the economies of scale are shared with shareholders; comparative fee structures used by other similar funds; and the level of expertise, conscientiousness, independence, and information with which the board acts. View "Campbell Family Trust v. J.P. Morgan Investment Management, Inc." on Justia Law
Lawler Manufacturing Co., Inc. v. Lawler
Lawler Manufacturing Co., Inc., appealed an order requiring Chris Lawler, president of Lawler Manufacturing, among other things, to authorize and give his consent to a pending shipment of goods from China, and to refrain from engaging in conduct that is contrary to the best interest of Lawler Manufacturing. In 2019, Lawler Manufacturing sued Delmas Lawler, a shareholder, vice president, and alleged former employee of Lawler Manufacturing, and Sandra Lawler, an alleged former employee, alleging breach of fiduciary duty, theft, and conspiracy. Delmas moved the court to order Lawler Manufacturing and Chris, as president of Lawler Manufacturing, to continue the business operations of Lawler Manufacturing in the usual and customary manner in which business affairs had been conducted before the litigation was commenced, which would include authorizing the shipment of an order from China that had been placed earlier. The trial court granted the motion and ordered Chris to act in the best interest of the company. The Alabama Supreme Court determined the trial court did not have jurisdiction to enter the order. The presiding judge disqualified himself from this case, and no longer had authority to appoint his successor or to enter the order appointing the judge who entered the order requiring Chris Lawler to act in Lawler Manufacturing's best interest. " Therefore, Presiding Judge Woodruff's appointment of Judge Fannin was not a valid judicial appointment, and that order is vacated." View "Lawler Manufacturing Co., Inc. v. Lawler" on Justia Law
United States v. DISH Network L.L.C.
DISH sold its satellite TV service through its own staff plus third parties: “telemarketing vendors”; “full-service retailers” that sold, installed, and serviced satellite gear; and “order-entry retailers” that used phones to sell nationwide. The United States and four states sued DISH and four order-entry retailers. The district court found that the defendants violated the Telemarketing Sales Rule, 16 C.F.R. 310, the Telephone Consumer Protection Act, 47 U.S.C. 227, and related state laws. A $280 million penalty was imposed. DISH appealed concerning the extent to which DISH had to coordinate do-not-call lists with and among these retailers or was otherwise responsible for their acts. The Seventh Circuit affirmed, except for a holding that DISH is liable for “substantially assisting” Star Satellite and its measure of damages; those violations were essentially counted twice. Regardless of the definition of “cause” under the rule, which makes it unlawful for a seller to “cause a telemarketer to engage in” violations, the retailers were DISH's agents, regardless of any contractual disclaimer. They acted directly for DISH, entering orders into DISH’s system; they did not have their own inventory and were not resellers of any kind. The retailers were authorized to sell DISH’s service by phone nationwide; the district court found that DISH knew about these retailers’ wrongful acts, so DISH is liable as the principal. View "United States v. DISH Network L.L.C." on Justia Law