A Canadian energy company acquired a Delaware corporation in a merger, resulting in significant change-in-control payments to three of the acquired corporation’s executives. Two of these executives negotiated the transaction. Stockholders of the acquired corporation sued, alleging breaches of fiduciary duties by the executives and the board of directors, claiming the merger was timed to benefit the executives at the expense of stockholders. They also alleged that the acquiror aided and abetted these breaches and that the executives issued a misleading proxy statement.The Court of Chancery found that the plaintiffs proved their aiding-and-abetting claims, determining that the acquiror had constructive knowledge of and participated in the breaches. The court assessed damages, entering a judgment of approximately $200 million against the acquiror.The Supreme Court of Delaware reviewed the case. It reversed the Court of Chancery’s judgment, holding that for an acquiror to be liable for aiding and abetting a sell-side breach of fiduciary duty, the acquiror must have actual knowledge of both the target’s breach and the wrongfulness of its own conduct. The court found that the standard of actual knowledge was not met in this case. The court also concluded that the acquiror’s actions did not constitute substantial assistance in the fiduciary breaches, as required for aiding-and-abetting liability. Consequently, the Supreme Court of Delaware reversed the Court of Chancery’s judgment. View "In re Columbia Pipeline Group, Inc. Merger Litigation" on Justia Law

The plaintiff, Shayne Lynn, was the founder and majority owner of High Fidelity, Inc., a Vermont cannabis business. In late 2020, defendants Peter Miller and Christopher Driessen, who controlled Slang Worldwide, Inc., proposed a merger between High Fidelity and Slang. They assured Lynn that Slang was financially sound and promised an $18 million investment into High Fidelity. Based on these representations, Lynn agreed to the merger in June 2021. However, Lynn later discovered that Slang was financially unstable and needed to borrow $18 million to survive. Lynn was subsequently terminated from his position.The Superior Court, Chittenden Unit, Civil Division, dismissed Lynn's complaint for failure to state a claim. The court held that Lynn did not allege any actionable misrepresentations to support a fraud claim and failed to allege justifiable reliance or the existence of a duty to support a negligent misrepresentation claim. Lynn appealed the decision.The Vermont Supreme Court reviewed the case de novo. The court held that the statements made by Miller and Driessen about Slang's financial health were opinions and not actionable misrepresentations of fact. The promise of an $18 million investment was a future promise, not a misrepresentation of existing fact, and Lynn did not allege that Miller and Driessen intended to renege on the promise when it was made. The court also found that Lynn's claim of misleading financial data was not pled with particularity as required by Rule 9(b).Regarding the negligent misrepresentation claim, the court held that Lynn did not adequately allege justifiable reliance, as he did not claim that the truth about Slang's financial status was unavailable to him. The court affirmed the dismissal of Lynn's complaint. View "Lynn v. Slang Worldwide, Inc." on Justia Law

Petitioner Dudley King and eight other individuals consigned their recreational vehicles (RVs) to Music City RV, LLC (MCRV), an RV dealer, for sale. On August 28, 2008, an involuntary Chapter 7 bankruptcy petition was filed against MCRV in the United States Bankruptcy Court for the Middle District of Tennessee. The issue before the bankruptcy court was whether the consigned RVs were part of the bankruptcy estate. The parties stipulated that MCRV was not primarily engaged in selling consigned vehicles, was a merchant under UCC § 9-102(20), and performed the services of a consignee. None of the consignors filed a UCC-1 financing statement.The Bankruptcy Trustee argued that the consigned RVs were governed by Article 2 of the Uniform Commercial Code (UCC) and were subordinate to the rights of perfected lien creditors, including the Trustee. Mr. King contended that the consignment was a true consignment of "consumer goods" and not a sale, thus not covered by the UCC, and the RVs should not be part of the estate. The bankruptcy court certified a question to the Supreme Court of Tennessee regarding whether such a consignment is covered under Tennessee Code Annotated section 47-2-326.The Supreme Court of Tennessee reviewed the statutory language and the Official Comments to the UCC. The court concluded that the 2001 amendment to Tennessee Code Annotated section 47-2-326 removed consignment transactions from the scope of Article 2. The court held that the consignment of an RV by a consumer to a Tennessee RV dealer for the purpose of selling the RV to a third person is not covered under section 47-2-326 of the UCC as adopted in Tennessee. The court assessed the costs of the appeal to the respondent, Robert H. Waldschmidt, Trustee. View "State of Tennessee v. Brown" on Justia Law

The case involves a putative class action filed by Christine Pino on behalf of herself and others against Grant Cardone and his associated entities, alleging violations of the Securities Act of 1933. Pino claims that Cardone made misleading statements and omissions on social media about the internal rate of return (IRR) and distribution projections for real estate investment funds, and misstated material facts regarding the funds' debt obligations.The United States District Court for the Central District of California initially dismissed the case under Federal Rule of Civil Procedure 12(b)(6), concluding that Cardone and his entities were not "sellers" under § 12(a)(2) of the Securities Act and that the statements in question were not actionable. Pino appealed, and the Ninth Circuit Court of Appeals reversed in part, holding that Cardone and his entities could be considered statutory sellers and that some of the statements were actionable. The case was remanded for further proceedings.Upon remand, Pino filed a second amended complaint, and the district court again dismissed the claims without leave to amend, holding that Pino had waived subjective falsity by disclaiming fraud and failed to plausibly allege subjective and objective falsity. The court also found that the omission of the SEC letter did not support a claim and that the debt obligation statement was not material.The United States Court of Appeals for the Ninth Circuit reviewed the case and reversed the district court's dismissal. The Ninth Circuit held that Pino did not waive subjective falsity by disclaiming fraud and sufficiently alleged that Cardone subjectively disbelieved his IRR and distribution projections, which were also objectively untrue. The court also held that Pino stated a material omission claim under § 12(a)(2) by alleging that Cardone failed to disclose the SEC letter. Additionally, the court found that Pino sufficiently alleged that Cardone misstated material facts regarding the funds' debt obligations, which could be considered material to a reasonable investor. The Ninth Circuit reversed the district court's dismissal and allowed the claims to proceed. View "PINO V. CARDONE CAPITAL, LLC" on Justia Law

In early 2020, Erste Asset Management GmbH filed a derivative action against Kraft Heinz Company’s fiduciaries, arising from an August 2018 stock sale by 3G Capital, Inc., a significant minority stockholder. The Court of Chancery dismissed the complaint under Rule 23.1, concluding that the plaintiffs failed to plead particularized facts creating a reasonable doubt that six of Kraft Heinz’s eleven directors were disinterested or lacked independence. One of those directors, John Cahill, was alleged to have ended his consulting relationship with Kraft Heinz before the derivative action was filed. However, it was later revealed that Cahill continued to serve as a consultant after July 2019, contrary to Kraft Heinz’s public disclosures.The Court of Chancery dismissed the derivative action, relying on the false representation that Cahill’s consulting agreement had terminated. Erste later discovered the ongoing consultancy and filed a new action seeking relief from the judgment under Rule 60(b) for fraud and newly discovered evidence. The Court of Chancery dismissed this new action, holding that the fraud must be extrinsic and that the new information was not newly discovered evidence because Erste could have learned it with reasonable diligence.The Supreme Court of Delaware reversed the Court of Chancery’s decision, holding that Rule 60(b)(3) applies to both intrinsic and extrinsic fraud and that Erste had pleaded a claim that Kraft Heinz’s misrepresentations prevented it from fairly presenting its case. The court remanded the case for further proceedings, including Rule 23.1 motion practice to reassess demand futility in light of the new evidence. The court also remanded Erste’s breach of fiduciary duty claim for further consideration. View "Erste Asset Management GmbH v. Hees" on Justia Law

Fraunhofer-Gesellschaft zur Förderung der angewandten Forschung e.V. (Fraunhofer) is a non-profit research organization that developed and patented multicarrier modulation (MCM) technology used in satellite radio. In 1998, Fraunhofer granted WorldSpace International Network, Inc. (WorldSpace) an exclusive license to its MCM technology patents. Fraunhofer also collaborated with XM Satellite Radio (XM) to develop a satellite radio system, requiring XM to obtain a sublicense from WorldSpace. XM later merged with Sirius Satellite Radio to form Sirius XM Radio Inc. (SXM), which continued using the XM system. In 2010, WorldSpace filed for bankruptcy, and Fraunhofer claimed the Master Agreement was terminated, reverting patent rights to Fraunhofer. In 2015, Fraunhofer notified SXM of alleged patent infringement and filed a lawsuit in 2017.The United States District Court for the District of Delaware initially dismissed the case, ruling SXM had a valid license. The Federal Circuit vacated this decision and remanded the case. On remand, the district court granted summary judgment for SXM, concluding Fraunhofer's claims were barred by equitable estoppel due to Fraunhofer's delay in asserting its rights and SXM's reliance on this delay to its detriment.The United States Court of Appeals for the Federal Circuit reviewed the case and reversed the district court's summary judgment. The Federal Circuit agreed that Fraunhofer's delay constituted misleading conduct but found that SXM did not indisputably rely on this conduct in deciding to migrate to the high-band system. The court noted that SXM's decision was based on business pragmatics rather than reliance on Fraunhofer's silence. The case was remanded for further proceedings to determine if SXM relied on Fraunhofer's conduct and if it was prejudiced by this reliance. View "Fraunhofer-Gesellschaft v. Sirius XM Radio Inc." on Justia Law

Two racing teams, 2311 Racing LLC and Front Row Motorsports, Inc., filed an antitrust lawsuit against the National Association for Stock Car Auto Racing, LLC (NASCAR) and its CEO, James France. The plaintiffs alleged that NASCAR, as a monopolist, required them to sign a release for past conduct as a condition of participating in the NASCAR Cup Series, which they claimed was anticompetitive. The plaintiffs sought declaratory and injunctive relief, as well as treble damages.The United States District Court for the Western District of North Carolina granted the plaintiffs' motion for a preliminary injunction. The court ordered NASCAR to allow the plaintiffs to participate in the Cup Series under the 2025 Charter Agreement terms, excluding the release provision. The district court found that the plaintiffs were likely to succeed on their Section 2 Sherman Act claim, concluding that a monopolist could not require a release from antitrust claims as a condition of doing business.The United States Court of Appeals for the Fourth Circuit reviewed the case and vacated the preliminary injunction. The appellate court held that the district court's theory of antitrust law was unsupported by any case law. The court found that the release provision did not constitute anticompetitive conduct and that the plaintiffs failed to show a likelihood of success on the merits. The Fourth Circuit emphasized that a preliminary injunction is an extraordinary remedy requiring a clear showing of entitlement, which the plaintiffs did not meet. The court concluded that the district court abused its discretion in granting the preliminary injunction. View "2311 Racing LLC v. National Association for Stock Car Auto Racing" on Justia Law

Catholic Charities Bureau, Inc., and its subentities sought an exemption from Wisconsin's unemployment compensation taxes, claiming they were controlled by the Roman Catholic Diocese of Superior and operated primarily for religious purposes. The Wisconsin Supreme Court denied the exemption, ruling that the organizations did not engage in proselytization or limit their services to Catholics, and thus were not operated primarily for religious purposes.The Wisconsin Department of Workforce Development initially denied the exemption request, but an Administrative Law Judge reversed this decision. The Wisconsin Labor and Industry Review Commission then reinstated the denial. The state trial court overruled the commission, granting the exemption, but the Wisconsin Court of Appeals reversed this decision. The Wisconsin Supreme Court affirmed the Court of Appeals, holding that the organizations' activities were secular and not primarily religious, and that the statute did not violate the First Amendment.The United States Supreme Court reviewed the case and held that the Wisconsin Supreme Court's application of the statute violated the First Amendment. The Court found that the statute imposed a denominational preference by differentiating between religions based on theological lines, subjecting it to strict scrutiny. The Court concluded that the statute, as applied, could not survive strict scrutiny because the State failed to show that the law was narrowly tailored to further a compelling government interest. The judgment of the Wisconsin Supreme Court was reversed, and the case was remanded for further proceedings. View "Catholic Charities Bureau, Inc. v. Wisconsin Labor and Industry Review Commission" on Justia Law

The case involves Ma Shun Bell, who filed a lawsuit against the law firm Friedman, Framme & Thrush (FFT), formerly known as Weinstock, Friedman & Friedman, alleging unfair trade practices and abuse of process. Bell claimed that FFT, representing First Investors Servicing Corporation (FISC), pursued a deficiency debt from her despite knowing it was not lawfully recoverable due to procedural defects in the vehicle repossession process.In the Superior Court of the District of Columbia, Bell's second amended complaint was dismissed. The court ruled that the complaint failed to allege the elements of a Uniform Commercial Code (UCC) violation, that FFT was immune from suit under the Consumer Protection Procedures Act (CPPA) and the D.C. Automobile Financing and Repossession Act (AFRA) due to its role as litigation attorneys, and that the complaint did not articulate how FFT’s conduct violated the Debt Collection Law (DCL). Additionally, the court found that Bell’s claims were barred by res judicata based on a Small Claims Court judgment in favor of FISC, with which FFT was found to be in privity.The District of Columbia Court of Appeals reviewed the case. The court concluded that Bell’s DCL cause of action could proceed, but her other causes of action were properly dismissed. The court held that the Superior Court erred in finding privity between FFT and FISC solely based on their attorney-client relationship and a contingency-fee arrangement. The court determined that the DCL claims were not barred by res judicata or collateral estoppel and that Bell had sufficiently alleged that FFT misrepresented the amount of the debt and charged excessive fees. The court affirmed the dismissal of the UCC, CPPA, and abuse of process claims but reversed the dismissal of the DCL claim, remanding the case for further proceedings. View "Bell v. Weinstock, Friedman & Friedman, PA" on Justia Law

The plaintiffs, Kristen Trombly and Christopher Patria, purchased a used vehicle from City Cars, LLC. Shortly after the purchase, they experienced issues with the vehicle's transmission. They contacted the dealership, which directed them to a repair shop that added transmission fluid. Despite this, the transmission problems persisted, and another dealership recommended replacing the transmission at a significant cost. The plaintiffs acknowledged buying the car "as is" but sought assistance from the defendant, who offered a partial refund, which the plaintiffs rejected, demanding a full refund or repair.The plaintiffs filed a complaint in July 2022, alleging a violation of the implied warranty of merchantability under New Hampshire's Uniform Commercial Code (UCC). The Circuit Court (Ryan, J.) found in favor of the plaintiffs, determining that the vehicle was not merchantable and that the implied warranty had not been disclaimed. The court awarded damages to the plaintiffs.The Supreme Court of New Hampshire reviewed the case. The defendant argued that the trial court erred by assessing the vehicle's merchantability based on its condition after the sale rather than at the time of sale. The Supreme Court agreed with the defendant, stating that the implied warranty of merchantability applies to the condition of the goods at the time of sale. The court found that the plaintiffs did not provide evidence that the transmission was faulty when the vehicle was sold. Consequently, the trial court's finding of non-merchantability was deemed erroneous. The Supreme Court reversed the lower court's decision. View "Trombly v. City Cars, LLC" on Justia Law