IonQ, Inc., a public company developing quantum computers, experienced a significant drop in its stock price from $7.86 on May 2, 2022, to $4.34 on May 12, 2022. A group of investors claimed this decline was due to the Scorpion Report, published on May 3, 2022, which alleged that IonQ had been committing widespread fraud regarding the value of its company. The investors filed a securities fraud lawsuit against IonQ, asserting that the report revealed the truth about IonQ's misrepresentations, causing their financial losses.The United States District Court for the District of Maryland dismissed the investors' first amended complaint for failing to state a claim, particularly for not adequately pleading loss causation. The court found that the Scorpion Report, authored by a short-seller with financial incentives, was not a reliable source of information. The court also noted that the investors failed to show that the report or IonQ's response revealed any new, truthful information to the market. The investors then sought reconsideration and leave to file a second amended complaint, which the district court denied, again citing the failure to plead loss causation.The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's decision. The appellate court agreed that the Scorpion Report, given its disclaimers and the financial motivations of its authors, could not plausibly be seen as revealing the truth about IonQ's alleged fraud. Additionally, IonQ's response to the report did not concede any truth to the allegations but rather dismissed them as inaccurate. Therefore, the investors failed to establish the necessary element of loss causation, making their proposed amendments futile. The court affirmed the district court's judgment. View "Defeo v. IonQ, Inc." on Justia Law

The Securities and Exchange Commission (SEC) brought a civil enforcement action against Commonwealth Equity Services, LLC, alleging that from 2014 to 2018, Commonwealth failed to adequately disclose potential conflicts of interest related to its revenue-sharing agreement with National Financial Services, LLC (NFS). The SEC claimed this omission violated Sections 206(2) and (4) of the Investment Advisers Act of 1940 and SEC Rule 206(4)-7. Commonwealth's representatives, who provided investment advice to clients, were unaware of the revenue-sharing arrangement, which the SEC argued created a conflict of interest by incentivizing Commonwealth to direct clients to higher-cost mutual fund share classes that generated revenue-sharing income.The United States District Court for the District of Massachusetts granted the SEC's motion for summary judgment on liability, finding that Commonwealth's disclosures were inadequate as a matter of law and that the firm acted negligently. The court also denied Commonwealth's cross-motion for summary judgment and its motion to reconsider. Subsequently, the district court entered final judgment against Commonwealth, ordering disgorgement of $65,588,906 in revenue-sharing income, $21,185,162 in prejudgment interest, and a civil penalty of $6,500,000. The court struck Commonwealth's expert declaration proposing an alternative disgorgement calculation and adopted the SEC's proposed amount.The United States Court of Appeals for the First Circuit vacated the district court's grant of summary judgment and the disgorgement order, remanding for further proceedings. The appellate court held that the issue of materiality should have been decided by a jury, as reasonable minds could differ on whether the additional disclosures would have significantly altered the total mix of information available to investors. The court also found that the SEC had not adequately shown a reasonable approximation or causal connection between Commonwealth's profits and the alleged violations, and that the district court must consider whether Commonwealth is entitled to deduct its expenses from any disgorgement awarded. View "Securities and Exchange Commission v. Commonwealth Equity Services, LLC" on Justia Law

In this case, plaintiffs in a class action alleged that several corporations in the broiler chicken market violated antitrust laws by engaging in bid rigging and reducing the supply of broiler chickens. The plaintiffs claimed that these actions led to anomalous dips in sales, which they attributed to collusion on price and output. The class action was divided into two tracks: Track 1, which omitted bid-rigging allegations for faster discovery and trial, and Track 2, which included bid-rigging theories and state law claims by indirect purchasers.The United States District Court for the Northern District of Illinois allowed the class to place claims against Simmons Foods, Inc. and Simmons Prepared Foods, Inc. on Track 1. Simmons settled for $8 million, but several class members, including the Boston Market group, objected to the settlement. They argued that the settlement was inadequate and that they should not be included in the class because they had filed their own antitrust suits. However, they missed the deadline to opt out of the class, and the district court approved the settlement.The United States Court of Appeals for the Seventh Circuit reviewed the case. The court held that the settlement's release language was broad enough to cover bid-rigging claims and that the $8 million settlement was reasonable. The court noted that the Boston Market group did not provide evidence that the settlement amount was unreasonably low. Additionally, the court observed that the class had lost a related trial and that criminal antitrust prosecutions against some firms had ended in mistrials or acquittals, indicating uncertainty about the plaintiffs' prospects. The court affirmed the district court's approval of the settlement. View "Boston Market Corporation v Mountainaire Farms, Inc." on Justia Law

The case involves a dispute among members of several limited liability companies, which was arbitrated according to the parties' agreement. The arbitrator issued a series of awards, ultimately granting plaintiff Laurence Rappaport $4.9 million on various claims, offset by an award to defendant Kenneth Pasternak, resulting in a net award of approximately $3.8 million. The arbitrator did not award Rappaport damages for the loss of future distributions of carried interest. Rappaport contended that the issue of carried interest was not presented to the arbitrator and that the arbitrator improperly ruled on it.The Chancery Division confirmed the arbitrator's awards after remanding for clarification that the arbitrator intended to resolve the issue of carried interest. Rappaport appealed, and the Appellate Division affirmed the awards for Rappaport’s claims for lost income and future income based on his termination as a manager. However, the Appellate Division ruled that the parties had excluded the question of carried interest from the arbitration and concluded that the arbitrator had raised the issue sua sponte. It modified the awards to exclude any inclusion of Rappaport’s membership interest, including future carried interest, and reversed the Chancery Division’s judgment.The Supreme Court of New Jersey reviewed the case and disagreed with the Appellate Division’s conclusion. The Court found that the issue of carried interest was arbitrable and had been raised by the parties at several stages of the arbitration. The Court held that the remedy of modification under N.J.S.A. 2A:23B-24(a)(2) was not warranted and that the Appellate Division’s review did not conform to the deferential standard governing judicial review of arbitration awards. The Court reversed the Appellate Division’s judgment and reinstated the Chancery Division’s decision confirming the arbitration award. View "Rappaport v. Pasternak" on Justia Law

Kaiser-Francis Oil Company (KFOC), a Delaware corporation, and its subsidiary Aurora-KF, LLC, sold Aurora Gas, LLC, an Alaska company, to Rieck Oil, Inc., a Delaware corporation formed by Kay Rieck. The sale included an indemnity guarantee from Deutsche Oel & Gas, S.A. (DOGSA), another company owned by Rieck, to cover obligations under a pre-existing guarantee by George B. Kaiser to Cook Inlet Regional, Inc. (CIRI). When Aurora Gas went bankrupt, CIRI called on Kaiser and KFOC to fulfill the obligations, but DOGSA and Rieck Oil did not indemnify them.KFOC sued Rieck Oil, DOGSA, and Kay Rieck in the Alaska Superior Court, seeking to pierce Rieck Oil’s corporate veil to hold Rieck personally liable. The superior court applied Delaware law, reasoning that most jurisdictions apply the law of the state of incorporation for veil-piercing claims. Under Delaware law, the court found that KFOC failed to prove the necessary element of fraud or injustice to pierce the corporate veil and ruled in favor of Rieck.The Supreme Court of Alaska reviewed the case, focusing on whether Alaska or Delaware law should apply to the veil-piercing claim. The court held that Alaska law applies, as veil-piercing is not a matter of internal corporate affairs but involves the rights of third parties. The court reasoned that Alaska has a more significant interest in the matter, given the involvement of Alaska land and an Alaska Native Corporation. Consequently, the court vacated the superior court’s ruling and remanded the case for further proceedings under Alaska law. View "Kaiser-Francis Oil Company v. Deutsche Oel & Gas, S.A." on Justia Law

Joe and Lora Killoran, along with their businesses, Maple Valley Ag Products, LLC, and Maple Valley Ag Chemicals, Inc., sued Kip Kaler for slander, intentional infliction of emotional distress (IIED), and unlawful interference with business. The Killorans alleged that Kaler made defamatory statements during Co-op meetings, calling them "crooks and thieves" and advising others not to do business with them. These statements allegedly caused significant reputational harm, economic losses, and mental distress to the Killorans and their businesses.The District Court of Cass County dismissed the complaint with prejudice. The court found that the slander claim was not well-pled, as the Killorans failed to provide sufficient factual support for the statements made by Kaler and did not adequately plead the falsity of the statements. The IIED claim was dismissed because the court determined that Kaler's conduct was not extreme and outrageous enough to permit recovery. The unlawful interference with business claim was dismissed due to the lack of an independent tort to support it, following the dismissal of the slander and IIED claims.The Supreme Court of North Dakota reviewed the case. The court affirmed the dismissal of the IIED claim, agreeing that Kaler's conduct did not meet the threshold for extreme and outrageous behavior. However, the court reversed the dismissal of the slander claim, finding that the district court had improperly applied the pleading standards and failed to accept the allegations as true. The court also reversed the dismissal of the unlawful interference with business claim, as the potential for an independent tort (slander) existed. The case was remanded for further proceedings consistent with the Supreme Court's opinion. View "Killoran v. Kaler" on Justia Law

Bigfoot Ventures Limited brought a shareholder derivative action on behalf of NextEngine, Inc. against Mark S. Knighton, ShapeTools, LLC, and NextEngine. Bigfoot alleged that the agreement between NextEngine and ShapeTools was not intended to benefit NextEngine or its shareholders. Bigfoot had a history of litigation against NextEngine, including disputes over loans and intellectual property (IP) rights.The United States District Court for the Central District of California dismissed Bigfoot’s suit, finding that Bigfoot could not fairly or adequately represent the interests of NextEngine’s shareholders as required by Federal Rule of Civil Procedure 23.1. The court considered the ongoing litigation between Bigfoot and NextEngine, which suggested that the derivative action was being used as leverage in other lawsuits. The court also found that Bigfoot’s personal interest in gaining control of NextEngine’s IP outweighed its interest in asserting rights on behalf of NextEngine.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal. The Ninth Circuit clarified that courts are not required to assess each of the eight factors from Larson v. Dumke when determining plaintiff adequacy in a shareholder derivative action. The court held that the district court did not err in considering the ongoing litigation as an outside entanglement and found that the record supported the district court’s conclusion that Bigfoot was an inadequate plaintiff. The Ninth Circuit also held that the district court did not abuse its discretion by vacating the trial to hear the motion to dismiss, as it raised significant issues that needed to be resolved before trial. View "BIGFOOT VENTURES LIMITED V. KNIGHTON" on Justia Law

The case involves two charitable organizations, Catholic Medical Mission Board, Inc. (CMMB) and Food for the Poor, Inc. (FFP), which were issued cease and desist orders and civil penalties by the Attorney General of California for allegedly making false or misleading statements in their charitable solicitations. The Attorney General found that both organizations overvalued in-kind donations and misrepresented their program efficiency ratios, leading to misleading donor solicitations.The Superior Court of Los Angeles County reviewed the case and found that the challenged statutory provisions, sections 12591.1(b) and 12599.6(f)(2) of the Government Code, were unconstitutional under the First Amendment as they constituted prior restraints on speech. The court vacated the civil penalties and issued permanent injunctions against the Attorney General, preventing the enforcement of these provisions. The court also reformed section 12591.1(b) to exclude violations of section 12599.6 from the Attorney General’s cease and desist authority.The California Court of Appeal, Second Appellate District, reviewed the case. The court affirmed the trial court’s constitutional rulings but vacated the permanent injunctions, stating that the trial court abused its discretion by granting them without requiring the plaintiffs to plead and prove entitlement to such relief. The appellate court remanded the case to allow the plaintiffs to amend their complaints to seek injunctive relief and to prove they are entitled to it. The court also affirmed the trial court’s reformation of section 12591.1(b) and vacated the postjudgment orders awarding attorney fees, directing the trial court to reconsider the fees in light of the appellate court’s rulings. View "Catholic Medical Mission Board, Inc. v. Bonta" on Justia Law

Studco Building Systems US, LLC, a metal fabricator, regularly purchased steel from Olympic Steel, Inc. and paid invoices via ACH payments. In October 2018, Studco received a fraudulent email, purportedly from Olympic, instructing it to redirect payments to a new account at 1st Advantage Federal Credit Union. Studco complied, transferring over $550,000 to the scammers' account. The scammers were never identified, and Studco bore the loss.The United States District Court for the Eastern District of Virginia held a bench trial and ruled in favor of Studco, awarding it $558,868.71 plus attorney fees and costs. The court found 1st Advantage liable under Virginia Code § 8.4A-207 for failing to act in a commercially reasonable manner and for breach of bailment. The court concluded that 1st Advantage should have detected the misdescription of the account name and number.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court reversed the district court's judgment on the misdescription claim, holding that under Virginia Code § 8.4A-207, a bank is not liable for depositing funds into an account based on the account number provided, unless it has actual knowledge of a misdescription. The court found no evidence that 1st Advantage had actual knowledge of the misdescription. The court also reversed the judgment on the bailment claim, stating that a general deposit in a bank does not create a bailment under Virginia law. The court affirmed the district court's denial of punitive damages to Studco.The Fourth Circuit's main holding was that 1st Advantage was not liable under § 8.4A-207 because it lacked actual knowledge of the misdescription, and no bailment was created by the ACH deposits. The case was remanded with instructions to enter judgment in favor of 1st Advantage. View "Studco Building Systems US, LLC v. 1st Advantage Federal Credit Union" on Justia Law

Plaintiff Vanguard Pai Lung, LLC, a manufacturer and distributor of high-speed circular knitting machines, sued its former president and CEO, William Moody, and his associated entities, Nova Trading USA, Inc., and Nova Wingate Holdings, LLC. The lawsuit stemmed from an investigation by Pai Lung Machinery Mill Co. Ltd., which owns a majority interest in Vanguard Pai Lung, revealing alleged fraud and embezzlement by Moody. Plaintiffs brought sixteen claims, including fraud, conversion, embezzlement, unfair and deceptive trade practices, and unjust enrichment. Defendants counterclaimed with twelve claims primarily based on alleged breaches of contract.The Superior Court of Mecklenburg County, designated as a mandatory complex business case, heard the case. After a jury found in favor of the plaintiffs on several claims, including fraud and conversion, defendants filed post-trial motions, including a motion for judgment notwithstanding the verdict (JNOV). The business court ruled that several issues raised in the JNOV motion were not preserved because they were not included in the directed verdict motion. The court also denied defendants' other post-trial motions on the merits.The Supreme Court of North Carolina reviewed the case. The court affirmed the business court's decision, endorsing the rule that to preserve an issue for a JNOV motion under Rule 50(b), the movant must have timely moved for a directed verdict on that same issue. The court agreed that the business court correctly determined that several of defendants' arguments were not preserved and properly rejected the remaining post-trial arguments on the merits. The Supreme Court affirmed the judgment and post-trial orders of the business court. View "Vanguard Pai Lung, LLC v. Moody" on Justia Law