Justia Business Law Opinion Summaries

ZF Micro Solutions, Inc., the successor of now deceased ZF Micro Devices, Inc., alleged TAT Capital Partners, Ltd., murdered its predecessor by inserting a board member who poisoned it. The trial court decided the claim for breach of TAT’s fiduciary duty as a director was equitable rather than legal and, after a court trial, entered judgment for TAT. ZF Micro Solutions argued this was error. The Court of Appeal agreed, holding that while examining the performance of a board member’s fiduciary duties would be required, resolution of this claim did not implicate the powers of equity, and it should have been tried as a matter at law. Judgment was reversed and the matter remanded for further proceedings. View "ZF Micro Solutions, Inc. v. TAT Capital Partners, Ltd." on Justia Law

Plaintiff initiated an action for involuntary dissolution of R. R. Crane Investment Corporation, Inc. (R. R. Crane), a family-owned investment business that he shared with his brother. To avoid corporate dissolution, the brother and R. R. Crane invoked the statutory appraisal and buyout provisions of the Corporations Code.1 In December of 2020, after a prolonged appraisal process, the trial court confirmed the fair value of Plaintiff’s shares at over $6.1 million, valued as of November 13, 2017, the date Plaintiff filed for dissolution.   On appeal, Plaintiff contends the trial court erred by failing to award him prejudgment interest on the valuation of his shares. He argues he was entitled to interest at a rate of 10 percent per annum from the date he first sought dissolution until the eventual purchase of his shares more than three years later. The Second Appellate District disagreed and affirmed the trial court’s ruling. The court held that it disagrees that prejudgment interest must be added to the appraised value of Plaintiff’s shares.   The court explained that a plaintiff’s entitlement to prejudgment interest pursuant to Civil Code section 3287, subdivision (a), does not apply to a buyout of shares under Corporations Code section 2000. Further, the court wrote that Plaintiff’s alternative contention that he is entitled to prejudgment interest under Civil Code section 3288also fails. The trial court correctly applied the plain language of Civil Code section 3288 and concluded that the valuation award “is not based on the breach of an obligation not arising from contract or a showing of oppression, fraud, or malice.” View "Crane v. R. R. Crane Investment Corp., Inc." on Justia Law

The California Department of Alcoholic Beverage Control (Department) suspended the license of real party in interest, Bogle Vineyards, Inc. (Bogle), for 10 days after finding that Bogle violated Business and Professions Code section 25502 (a)(2) by furnishing, giving, or lending a “thing of value”—a nonoperational pizza oven—to a Raley’s grocery store as part of a promotional display. The pizza oven was part of a Bogle point-of-sale promotional campaign highlighting pizza month, in which a customer would receive $4 off a pizza with the purchase of a bottle of Bogle wine. Bogle provided a guidance packet on the promotion for its employees and wholesaler which stated in part that “[i]f buyers are still w[]ary, FYI the ovens ‘don’t work’ without propane AND the regulators can be removed, if needed.” It also showed how the pizza ovens were to be set up in the displays. Bogle paid for the pizza oven promotional campaign. Raley's store #119 received an oven for use in the display, but did not fully assemble the oven per instructions. As a result, the oven was inoperative when placed in the display at the store. Later, an agent for Bogle returned to store #119 ti discuss the display; the display had been removed, and the oven parts not used in assembly, had disappeared. An ALJ determined that while Bogle did not intend to "gift" the ovens to retailers in exchange for prominent displays in their stores, the "net result" was an unlawful furnishing in violation of the statute. Bogle appealed the Department’s decision to the Alcoholic Beverage Control Appeals Board (Board), and the Board reversed the suspension, calling the Department’s result “absurd.” It concluded that the Department’s decision that the pizza oven was a “thing of value” was inaccurate as a matter of law and was not supported by substantial evidence because there was no evidence presented that Raley’s reassembled the pizza oven or removed the pizza stone for use. It therefore found the Department’s result was based on speculation and conjecture and was not within the spirit or letter of the law. It accordingly reversed the Department’s decision. The Court of Appeal agreed with Bogle that the Department erred in finding the inoperative pizza oven, used solely for the purposes of a temporary promotional display, was a "thing of value" under the statute. View "Dept. of Alcoholic Beverage Control v. Alcoholic Beverage etc." on Justia Law

This litigation arose from a decision by the City of Chula Vista (the City) to reject applications by CV Amalgamated LLC, dba Caligrown (CVA) for licenses to operate retail cannabis stores in the City. In 2018, the City enacted an ordinance regulating commercial cannabis businesses (the Cannabis Ordinance). Among other things, the Cannabis Ordinance allowed for a maximum of eight storefront retail cannabis business licenses, with up to two licenses in each of the City’s four council districts (the Council Districts). CVA submitted applications for storefront retail cannabis business licenses in each of the City’s four Council Districts. CVA filed an appeal with the City Manager, in which it challenged the City’s rejections of its applications for licenses in Council Districts One, Three and Four. After a hearing, CVA's applications were again denied, and it initiated this litigation in September 2020. On January 29, 2021, the trial court issued an order denying CVA’s motion for a writ of mandate. The trial court made no factual findings and failed to explain why it concluded that CVA had failed to meet its burden. The Court of Appeal concluded the City failed to follow its ministerial and mandatory duty to follow its own procedures when it rejected CVA's applications in the initial assessments of the applications. The trial court's judgment was reversed with instructions to issue a writ of mandate directing the City to reassess CVA's applications in districts One, Three and Four. View "CV Amalgamated LLC v. City of Chula Vista" on Justia Law

Plaintiff, who owned a 1 percent interest in a limited liability company (LLC), filed a lawsuit seeking judicial dissolution of the LLC under Corporations Code section 17707.03. Defendants, other members of the LLC who together held 50 percent of the membership interests, filed a motion to avoid the dissolution by purchasing Plaintiff’s 1 percent interest. Then Plaintiff, together with other members owning 49 percent of the membership interests in the LLC—for a total of 50 percent—voted to dissolve the LLC.   The issue on appeal is whether the vote to dissolve the LLC extinguished the right Defendants otherwise would have had to purchase Plaintiff’s 1 percent interest and avoid dissolution of the LLC. The Second Appellate District concluded, in accordance with the plain language of section 17707.01, that the answer is “yes,” and the vote of 50 percent of the LLC membership interests to dissolve the LLC must be given effect. Consequently, the court held that the trial court erred when it issued an order appointing appraisers to determine the price Defendants must pay to purchase Plaintiff’s 1 percent membership interest. The court ordered the trial court to dismiss the buyout proceeding as moot and directed the parties to wind up the activities of the LLC. View "Friend of Camden v. Brandt" on Justia Law

Luis Munoz and LR Munoz Real Estate Holdings, LLC (together, Munoz) bought a hotel from a company owned and managed by Rajesh Patel and his son, Shivam. Before escrow closed, the parties negotiated a leaseback arrangement requiring Munoz to lease the hotel back to the Patels’ company after the sale. Escrow closed and the parties thereafter executed the previously-negotiated lease. However, Munoz contended the Patels secretly swapped out the agreed-upon lease for a lease substantially more beneficial to the Patels and worse for Munoz, and then tricked him into signing it. Munoz filed suit against the Patels, an alleged alter ego entity of the Patels called Inn Lending, LLC, and other defendants involved in the sale, asserting causes of action for breach of contract, breach of the covenant of good faith and fair dealing, promissory fraud, and elder financial abuse, among other causes of action. Rajesh and Inn Lending demurred to the operative second amended complaint, the trial court sustained the demurrer without leave to amend. In a prior opinion, the Court of Appeal reversed the judgment and determined, among other things, that Munoz alleged a viable fraud cause of action based on a theory of fraud in the execution. The California Supreme Court granted review and remanded the case back to the appellate court, ordering a rehearing of the parties arguments for fraud. After reconsideration, the Court of Appeal concluded operative complaint alleged facts sufficient to state a viable cause of action for fraud in the execution against Rajesh, but not against Inn Lending. Additionally, the Court concluded the complaint plead facts sufficient to state an elder financial abuse cause of action against both Rajesh and Inn Lending. The Court concluded Munoz failed to establish that the trial court erred in dismissing his breach of contract and bad faith causes of action. In light of these determinations, the appeals court reversed the trial court judgment and remand the matter with instructions that the trial court vacate its order sustaining the demurrer to the entire complaint, and enter a new order. View "Munoz v. Patel" on Justia Law

Turo, an Internet-based platform, allows vehicle owners to list, and customers to rent, specific passenger vehicles, processes reservations and payments and retains a percentage of the proceeds of each rental transaction. Turo provides a liability insurance policy through a third-party insurer. Turo competes with traditional on-airport and off-airport rental car companies and has used phrases like “rent” and “rental car” in its advertisements.The government sued Turo under the Unfair Competition Law (Bus. & Prof. Code 17200) for operating a rental car business at SFO without the required permit, engaging in prohibited curbside transactions at SFO, and using airport roadways and offering services on airport property without permission. Turo sought a declaratory judgment that it is not a rental car company and alleged that SFO had unlawfully demanded that Turo obtain an off-airport rental car company permit, and pay fees that SFO is authorized to charge only “rental car companies” under Government Code 50474.1(a).The court of appeal held that Turo is not a rental car company. That term is not defined in the Government Code but is defined in nearly identical language in three separate California statutes to mean a person or entity in the business of renting passenger vehicles to the public. A rental car company has control over the vehicles in its fleet in a way Turo does not View "Turo v. Superior Court of the City and County of San Francisco" on Justia Law

The co-tenancy provision in the parties’ lease required a shopping center to have either: (1) three anchor tenants; or (2) 60 percent of the space leased, and, if it did not, Tenant-respondent JoAnn Stores, LLC was permitted to pay “Substitute Rent.” In 2018, Jo-Ann informed JJD it intended to start paying Substitute Rent effective July 1, 2018, because the co-tenancy provision was not met after two anchor tenants closed. Landlord-appellant JJD-HOV Elk Grove, LLC (JJD) responded that the co-tenancy provision was an unenforceable penalty under the holding in Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc., 232 Cal.App.4th 1332 (2015). Jo-Ann contended Grand Prospect was distinguishable and the co-tenancy provision was enforceable. JJD and Jo-Ann filed competing complaints for declaratory relief and cross-motions for summary judgment. The trial court found the co-tenancy provision was enforceable, and thus granted Jo- Ann’s motion, denied JJD’s, and entered judgment accordingly. JJD appealed. The Court of Appeal declined to follow the rule announced in Grand Prospect here, and instead held that this case was governed by the general rule that courts enforce contracts as written. The Court therefore agreed with the trial court’s conclusion that the co-tenancy provision at issue in this case was enforceable, and affirmed the judgment. View "JJD-HOV Elk Grove, LLC v. Jo-Ann Stores" on Justia Law

Plaintiff Rick Fowler sought a writ of mandate against defendant Golden Pacific Bancorp, Inc. (Bancorp), to enforce his statutory rights as a director and majority shareholder to inspect corporate books and records. Bancorp opposed the petition, arguing that the trial court should limit Fowler’s inspection rights because he was involved in ongoing litigation with Bancorp and could use the information to undermine Bancorp’s position in the lawsuit. The trial court granted Fowler’s writ petition. Bancorp appealed. After the Court of Appeal issued an oral argument waiver notice, Bancorp moved to dismiss the appeal as moot, citing that because Bancorp had been acquired by Social Finance, Inc., Fowler was no longer a Bancorp board member, and therefore it was impossible for the Court to grant effective relief. Ultimately, the Court of Appeal found Fowler was indeed no longer a member of Bancorp’s board of directors and therefore had no director’s inspection rights. Nevertheless, exercising discretion, the Court reached the merits of the case because it presented an issue of substantial and continuing public interest: whether a director’s “absolute” right of inspection under California Corporations Code section 1602 could be curtailed because the director and corporation were involved in litigation and there was a possibility the documents could be used to harm the corporation. “[T]he mere possibility that information could be used adversely to the corporation is not by itself sufficient to defeat a director’s inspection rights. Rather, any exception to the general rule favoring unfettered access must be limited to extreme cases, where enforcing an ‘absolute’ right of inspection would produce an absurd result, such as when the evidence establishes the director’s clear intent to use the information to breach fiduciary duties or otherwise commit a tort against the corporation.” The Court declined to reach the other question referenced in the parties’ briefs concerning Fowler’s inspection rights as a shareholder, because that issue was not resolved by the trial court and the record was insufficiently developed for a determination of whether it was moot. The case was remanded for the trial court to consider whether that issue was moot and, if not, to resolve any remaining disputes in the first instance. View "Fowler v. Golden Pacific Bancorp." on Justia Law

Plaintiff appealed a summary judgment entered in favor of Defendant in her lawsuit for damages against Defendant based on his alter ego liability for a $157,370 judgment against a corporation. Plaintiff claimed that Magnolia Funding, Inc., the subject of a prior lawsuit that provided the original loan, and Magnolia Home Loans, Inc. “were the same company”; and that Defendant was “the sole owner, officer, and director of each.” Magnolia Funding closed when Magnolia Home Loans got up and running.   The Second Appellate district concluded, among other things, that (1) the trial court erred by granting summary judgment in favor of the corporation; there are triable issues of fact concerning Defendant’s alter ego liability, and (2) Plaintiff’s civil action does not violate Defendant’s right to due process.   The court explained that under the alter ego doctrine, the corporate veil may be lifted to show the corporate form is fiction and determine who controls the corporate entity and who is liable for its debts. Courts look to the totality of circumstances to determine who actually owns or controls the corporate entity and who is using it as “a mere shell or conduit” for his or her own personal interests. When Magnolia Funding, Inc. dissolved, Magnolia Home Loans, Inc. received its remaining physical assets. At the end of the fiscal year 2009, Magnolia Home Loans, Inc. held cash and all that money was paid to Defendant. This is a triable issue of fact concerning Escamilla’s alter ego liability. View "Lopez v. Escamilla" on Justia Law