Articles Posted in U.S. 1st Circuit Court of Appeals

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At issue in this appeal was a tax credit that offset federal tax owed on income earned in the operation of a business in Puerto Rico. The credit remained available to taxpayers under section 936 of the Internal Revenue Code during the ten-year transition period after section 936 was repealed. During the transition period, the taxable income an eligible claimant could claim in computing its credit was capped at an amount approximately equal to the average of the amounts it had previously claimed, but the cap could be adjusted for a taxpayer’s purchases and sales of businesses that had generated credit-eligible income. In this case, Appellant-corporation, a U.S. taxpayer, sold a line of businesses in Puerto Rico to a foreign corporation that did not pay U.S. corporate income taxes. Appellant argued it was not required to reduce its cap because the buyer had no credit cap to increase. The district court granted summary judgment for the government. The First Circuit reversed, holding (1) the reduction in a seller’s cap as a result of the sale of a business line is appropriate only in the event of a corresponding increase in the buyer’s cap; and (2) therefore, the transfers did not reduce Appellant’s credit cap. View "OMJ Pharms., Inc. v. United States" on Justia Law

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Defendant, a citizen and resident of Puerto Rico, borrowed $700,000 from Plaintiff, a citizen and resident of Greece. Plaintiff’s loan was not evidenced by "even a single scrap of paper." The parties subsequently disputed who the borrower was, whether Caribbean Carrier Holding (Panama), Inc., as Defendant claimed, or Defendant, as Plaintiff claimed. When the parties could not agree on the identity of the borrower, Plaintiff brought a collection action against Defendant in the United States District Court for the District of Puerto Rico. The district judge ruled that Plaintiff had not sustained his burden of proof and entered judgment for Defendant. The First Circuit Court of Appeals affirmed, holding that the district judge (1) substantially complied with the requirements of Fed. R. Civ. P. 52(a)(1), and (2) applied the correct substantive law standard in adjudicating Plaintiff’s claim. View "Valsamis v. Gonzalez-Romero" on Justia Law

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After Westernbank of Puerto Rico was ordered closed in the late 2000s and the Federal Deposit Insurance Corporation (“FDIC”) was appointed receiver, the FDIC discovered that certain bank directors and officers had breached their fiduciary duty by jeopardizing the bank’s financial soundness, causing over $176 million in damages to the bank. The directors and officers asked their insurer, Chartis Insurance Company, to confirm coverage under a directors’ and officers’ liability-insurance policy issued by Chartis to Westerbank’s owner, W Holding Company, Inc. Chartis denied coverage. The directors and officers and the FDIC sued Chartis. In this “procedurally complicated” case, a district judge eventually issued an order requiring Chartis to advance defense costs to the directors and officers. The First Circuit Court of Appeals affirmed, holding (1) the Court had jurisdiction to hear the parties; and (2) the district judge did not err in making its cost-advancement ruling. View "W Holding Co., Inc. v. AIG Ins. Co. - P.R." on Justia Law

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HSBC Realty Credit Corporation loaned Brandywine Partners, LLC $15.9 million pursuant to a property-loan agreement for the purchase and development of industrial property in Delaware. J. Brian O’Neill, a principal of Brandywine, signed an absolute personal guaranty for the loan. O’Neill’s liability was capped at $8.1 million. After Brandywine defaulted on its repayment obligations, HSB filed suit on the guaranty agreement. O’Neill filed several defenses and counterclaims essentially asserting that HSBC must first recover any amount owed by Brandywine by proceeding against the Delaware property before turning to O’Neill’s personal guaranty. The district judge struck O’Neill’s defenses and counterclaims, granted HSBC judgment on the pleadings, and denied O’Neill’s request to replead. The First Circuit Court of Appeals affirmed, holding that the district court judge did not commit reversible error in granting HSBC judgment on the pleadings or in denying O’Neill leave to replead, as O’Neill did not provide any additional facts which, if repled, would permit him to make out a plausible claim for relief when matched up against the guaranty’s express language. View "HSBC Realty Credit Corp. v. O'Neill" on Justia Law

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The parties in this case were a group of chess players and their opponent, the Puerto Rico Chess Federation. The chess players filed suit against the chess federation in Puerto Rico court, alleging violations of their rights under the United States and Puerto Rico constitutions and Puerto Rico law. The chess federation successfully removed the case to federal court. The chess players subsequently filed a second case, again in Puerto Rico court, excluding any claims under federal law. The federation also removed this case. The district court consolidated the two cases and declared jurisdiction over the second case under the All Writs Act. Ultimately, the district court granted summary judgment in favor of the federation on all claims. The First Circuit Court of Appeals affirmed in part and reversed in part, holding (1) the district court had federal subject matter jurisdiction over the first case but did not have subject matter jurisdiction over the second case; and (2) the district court incorrectly granted summary judgment to the federal on some of the chess players' Commonwealth law claims. View "Ortiz-Bonilla v. Federacion de Ajedrez de P.R., Inc." on Justia Law

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This case concerned the withdrawal liability for a pro rata share of unfunded vested benefits to a multiemployer pension fund of Scott Brass, Inc. (SBI), a bankrupt company. SBI had withdrawal pension obligations to the multiemployer pension fund (TPF), which sought to impose the obligations on two private equity funds (Plaintiffs). Plaintiffs asserted they were passive investors that indirectly controlled SBI and sought a declaratory judgment against the TPF. The TPF counterclaimed and sought payment of the withdrawal liability at issue. The district court entered summary judgment for Plaintiffs. The First Circuit Court of Appeals affirmed in part, reversed in part, and vacated in part, holding (1) at least one of the private equity funds that operated SBI sufficiently operated and was advantaged by its relationship with SBI, and further factual development was necessary as to the other equity fund; (2) the district court erred in entering summary judgment for Plaintiffs under the "trades or businesses" aspect of a two-part "control group" test under 29 U.S.C. 1301(b)(1); and (3) the district court correctly entered summary judgment for Plaintiffs on TPF's claim of liability on the ground that the funds had engaged in a transaction to evade or avoid withdrawal liability. Remanded. View "Sun Capital Partners III, LP v. New England Teamsters & Trucking Indus. Pension Fund" on Justia Law

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Appellant signed a loan agreement with Bank for a line of credit for his business (Business). Appellant later defaulted on the loan, and Bank brought a collection action against Appellant, his wife, their conjugal partnership, and Business. The FDIC subsequently took over the Bank as receiver and obtained summary judgment in its favor on the collection action. The district court also dismissed Appellants' counterclaim for lack of jurisdiction, finding that Appellants had not timely taken the steps necessary to maintain an action against the FDIC. The First Circuit Court of Appeals affirmed, holding (1) summary judgment was properly granted on the collection action because factual disputes did not remain concerning Bank's role in causing Appellants to breach their loan agreement and whether Appellants should be released from their obligations under that agreement; and (2) the district court correctly dismissed Appellants' counterclaims on jurisdictional grounds, as the Bank had insufficient assets to make any distribution on the claims of general unsecured creditors, including Appellants if they prevailed on their counterclaim, and therefore, the claim was not redressable. View "Fed. Deposit Ins. Corp., as receiver for R-G Premier Bank of P.R. v. Estrada-Rivera" on Justia Law

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Plaintiff filed a second amended complaint against polystyrene food service packaging manufacturers and two trade associations, claiming that Defendants refused in concert to deal with Plaintiff in a recycling business method for polystyrene food service products. In its complaint, Plaintiff alleged violations of section 1 of the Sherman Act and the Massachusetts Fair Business Practices Act (Mass. Gen. Laws ch. 93A). The district court granted Defendants' motions to dismiss and entered judgment in their favor, finding that, as in Bell Atlantic Corp. v. Twombly, there were legitimate business reasons that could explain Defendants' refusal to deal with Plaintiff or to compete with each other for market share. The First Circuit Court of Appeals vacated and remanded, holding (1) Plaintiff alleged sufficient facts to adequately plead its Sherman Act claim; and (2) because the district court summarily dismissed Plaintiff's chapter 93 claim because it failed for the same reasons that its Sherman Act claim failed, the issue needed to be reconsidered. View "Evergreen Partnering Group, Inc. v. Pactiv Corp." on Justia Law

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CVS Corp. and Caremark Rx Inc. merged in 2007, creating CVS Caremark Corporation. In 2010, Plaintiffs filed this putative class action against CVS Caremark and certain of its current and former employees. The complaint was later amended to add new plaintiffs - the retirement systems of the city of Brockton and the counties of Plymouth and Norfolk, Massachusetts (collectively, the Retirement Systems). The Retirement Systems claimed that Defendants made material misrepresentations in violation of the Securities Exchange Act and rule 10b-5 of the Securities and Exchange Commission. Specifically, the Retirement Systems alleged that CVS Caremark's CEO's statements in an earnings call with investors caused a drop in CVS Caremark's share price. The district court granted Defendants' motion to dismiss the complaint for failure to state a claim for relief. The First Circuit Court of Appeals vacated the dismissal of the complaint and remanded, holding that Plaintiffs' complaint alleged loss causation sufficiently plausible to foreclose dismissal. View "Mass. Ret. Sys. v. CVS Caremark Corp." on Justia Law

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Relator brought a federal False Claims Act (FCA) suit against Millennium Laboratories of California (Millennium) and several physicians, alleging that Millennium encouraged physicians to bill the government multiple times for single drug tests and to perform excessive, medically unnecessary original and confirmation tests. Prior to the filing of the complaint, Millennium filed a suit against Relator's employer, Calloway Laboratories (Calloway), in California state court. Millennium attached emails from from Calloway employees to third parties suggesting fraudulent activity in Millennium's billing practices. The district court dismissed Relator's complaint, finding that the prior disclosure constituted a jurisdictional bar to Relator's suit. The First Circuit Court of Appeals held that the court erred in dismissing all of Relator's claims when only some of them had been disclosed by way of being substantially similar to the information contained in Millennium's prior California suit. Remanded for the district court's consideration of whether Relator's remaining FCA claim was sufficiently pled. View "United States ex rel. Estate of Cunningham v. Millennium Labs. of Cal., Inc." on Justia Law