Justia Business Law Opinion Summaries

The company was established in 1998 to develop systems for high-speed Internet connections for home computers. After a decision to not respond to an acquisition offer, the company was in financial trouble by 2000 and took an $11 million loan for 90 days and a second loan for $9 million, on which it defaulted. The company exchanged its assets for stock in an amount that would have satisfied creditors and preferred stockholders. The stock, the company's only asset in bankruptcy, fell to a value less than the claims of creditors. Common shareholders brought suit. The district court entered summary judgment for the defendants. The Seventh Circuit reversed and remanded, stating that the company's failure was not likely solely the result of the "burst of the dot-com bubble." Even if the directors were excused from liability for failure to exercise due care, as permitted by Delaware law, there was evidence of disloyalty, which was not excused. Evidence of disloyalty switched the burden of proving "entire fairness" with respect to the loans on the directors. There was enough evidence of causation and that certain preferred stockholders (venture capital groups) aided and abetted the directors to submit the question to a jury.

After selling a subsidiary, the company no longer had employees participating in the multi-employer pension plan and sought to withdraw. The underfunded plan claimed that the company owed about $5 million. An arbitrator determined that the company did not have withdrawal liability. The district court agreed. The Seventh Circuit affirmed. The plan argued that the company had closed other plants, outsourcing work, so that the sale was not solely responsible for the company not continuing contributions. A company is not liable for withdrawal under 29 U.S.C. 1384 if withdrawal is "solely" because of a bona fide sale. The court stated that there was evidence to support the arbitrator's finding that the sale was not part of a plan by the company to withdraw in stages and that the focus must be the transaction at issue: a sale to an ongoing business that is willing and able to continue contributions.

Residents of Missouri contracted with a Texas franchisor to operate tax preparation franchises near St. Louis. The contract contained an arbitration clause and identified Texas as the forum for both arbitration and litigation. When the businesses failed, the franchisees sued the Texas company in Illinois. The district court dismissed. The Seventh Circuit affirmed. The court noted that the parties had not briefed Texas law, but that the Illinois Franchise Act, 815 ILCS 705/4, allows out-of-state arbitration agreements, despite disallowing forum selection; the Federal Arbitration Act, 9 U.S.C. 1, strongly favors agreements for arbitration. Even if the Texas company knowingly authorized a franchise in Illinois, the arbitration clause justified dismissal. The district court did not have jurisdiction to order arbitration outside the district, but the issue was not waived. The court rejected claims of fraudulent inducement and unconscionability.