Justia Business Law Opinion Summaries

A group of individuals with large social media followings was charged with securities fraud and conspiracy to commit securities fraud. The government alleged that these individuals engaged in a “pump and dump” scheme: they would purchase securities, then use their social media platforms to post false or misleading information about those securities to induce their followers to buy, thereby artificially inflating the price. After the price increased, the defendants would sell their holdings for a profit. The indictment claimed that the defendants collectively profited $114 million from this scheme.After indictment in the United States District Court for the Southern District of Texas, one defendant pleaded guilty while the others moved to dismiss the indictment. The district court granted the motion to dismiss, reasoning that the indictment failed to allege a scheme to deprive victims of a traditional property interest, instead only alleging deprivation of valuable economic information. The district court relied on the Supreme Court’s decision in Ciminelli v. United States, which held that deprivation of economic information alone does not constitute fraud under federal law.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the sufficiency of the indictment de novo. The Fifth Circuit concluded that the indictment adequately alleged both a scheme to defraud and an intent to defraud, as required by the securities fraud statute. The court distinguished the case from Ciminelli, finding that the indictment alleged a fraudulent-inducement theory—whereby the defendants used misrepresentations to induce followers to part with money by purchasing securities—not merely a deprivation of information. The court also held that the fraud statutes do not require proof that the defendants intended to cause economic harm, only that they intended to obtain money or property by deceit. The Fifth Circuit reversed the district court’s dismissal of the indictment and remanded the case for further proceedings. View "USA v. Constantinescu" on Justia Law

WorldVue Connect, LLC, a company specializing in in-room entertainment and technology for hotels, purchased the domestic assets of Hospitality WiFi, LLC from Jason Szuch for $9,450,000 in 2022. Szuch retained interests in international affiliates and received a minority stake in a new entity, WorldVue Global, LLC. The transaction included the transfer of goodwill, trade secrets, and a valuable technical support team. In 2024, after the business relationship soured, WorldVue bought out Szuch’s minority interest and entered into a settlement agreement with Szuch and his companies, as well as a separation agreement with a key employee, Shan Griffin. These agreements, governed by Texas law, contained non-compete, non-solicitation, and confidentiality provisions effective for one year.Following the agreements, evidence emerged that the Szuch Parties recruited WorldVue’s employees and independent contractors, including those providing remote support to clients in the contractually defined “Restricted Area.” WorldVue filed suit in Texas state court for breach of contract and tortious interference, seeking injunctive relief. The state court issued a temporary restraining order, and after removal to the United States District Court for the Southern District of Texas, the TRO was extended. The district court found that the Szuch Parties breached the agreements by soliciting WorldVue’s workers and using confidential information, and granted a preliminary injunction prohibiting further solicitation and use of confidential information.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the preliminary injunction for abuse of discretion. The court affirmed the injunction, holding that the non-solicitation provision applied to workers performing services in the Restricted Area, regardless of their physical location, and that customer service agents were covered as independent contractors. The court modified the injunction to clarify that “confidential information” does not include Szuch’s personal knowledge of worker identities acquired prior to the asset sale. View "WorldVue Connect v. Szuch" on Justia Law

The Securities and Exchange Commission (SEC) adopted two rules intended to increase transparency in the securities lending and short sale markets. Securities lending involves temporarily transferring securities from a lender to a borrower for a fee, and is closely tied to short selling, where investors sell securities they do not own, hoping to profit from a price decline. The SEC found both markets to be opaque, making regulatory oversight difficult. To address this, the SEC, under authority from the Dodd-Frank Act, promulgated the Securities Lending Rule (requiring prompt reporting of securities loans) and the Short Sale Rule (mandating monthly aggregate reporting of short sale positions by institutional investment managers).The petitioners, associations representing institutional investment managers, challenged both rules before the United States Court of Appeals for the Fifth Circuit. They argued that the rules were arbitrary and capricious, exceeded the SEC’s statutory authority, conflicted with each other, and that the SEC failed to consider their cumulative economic impact. They also raised procedural objections, including inadequate opportunity for public comment and concerns about the extraterritorial application of the Short Sale Rule. The SEC defended its process and statutory authority, maintaining that the rules addressed distinct regulatory gaps and that its economic analysis was sufficient.The United States Court of Appeals for the Fifth Circuit held that the SEC acted within its statutory authority in adopting both rules and provided adequate opportunity for public comment. The court also found that the SEC reasonably explained its choices regarding reporting systems and that the Short Sale Rule did not have impermissible extraterritorial reach. However, the court concluded that the SEC failed to consider and quantify the cumulative economic impact of the two interrelated rules, as required by the Administrative Procedure Act and the Exchange Act. The court granted the petition for review in part and remanded both rules to the SEC for further proceedings on this issue, while denying the remainder of the petition. View "Natl Assoc Priv Fund Mgr v. SEC" on Justia Law

Fire Protection Service, Inc. (FPS), a Texas business, served as a non-exclusive dealer for Survitec Survival Products, Inc., which manufactures and distributes marine safety products, including life rafts. These life rafts, each valued at over $15,000 and capable of accommodating up to 30 people, are required by federal law and international treaties to be installed on various types of navigable vessels used in industries such as offshore oil and gas, commercial fishing, and maritime shipping. In August 2017, Survitec terminated its dealership agreement with FPS without citing cause and did not repurchase FPS’s unsold inventory.FPS filed suit in the United States District Court for the Southern District of Texas, alleging that Survitec’s actions violated the Texas Fair Practices of Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act (“Dealer Act”). After a bench trial, the district court granted Survitec’s Rule 52(c) motion, ruling that the life rafts did not qualify as “Equipment” under the Act, and therefore the Act did not apply to the parties’ agreement.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the district court’s legal conclusions de novo. The Fifth Circuit held that Survitec’s life rafts are “Equipment” under the Dealer Act because they are used “in connection with” commercial activities covered by the Act, including construction, maintenance, mining (which encompasses oil and gas extraction), and industrial activities. The court found that the Act’s language and legislative intent support a broad interpretation, and that the life rafts meet the statutory definition. Accordingly, the Fifth Circuit reversed the district court’s judgment and remanded the case for further proceedings consistent with its opinion. View "Fire Protection v. Survitec Survival" on Justia Law

A trading company and a base oil manufacturer entered into a sales agreement in 2016, under which the manufacturer would serve as the exclusive North American sales representative for a high-quality base oil product distributed by the trading company. The agreement included noncompete provisions and was set to expire at the end of 2021. In late 2020, suspicions arose between the parties regarding potential breaches of the agreement, leading to a series of letters in which the trading company accused the manufacturer of selling a competing product and threatened termination if the alleged breach was not cured. The manufacturer responded by denying any breach and, after further correspondence, declared the agreement terminated. The trading company agreed that the agreement was terminated, and both parties ceased their business relationship.The trading company then filed suit in the United States District Court for the Southern District of Texas, alleging antitrust violations, breach of contract, business disparagement, and misappropriation of trade secrets. The manufacturer counterclaimed for breach of contract and tortious interference. After a bench trial, the district court found in favor of the manufacturer on the breach of contract and trade secret claims, awarding over $1.3 million in damages. However, the court determined that the agreement was mutually terminated, not due to anticipatory repudiation by the trading company, and denied the manufacturer’s request for attorneys’ fees and prevailing party costs.On appeal, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s finding that the trading company did not commit anticipatory repudiation and that the agreement was mutually terminated. The Fifth Circuit also affirmed the denial of prevailing party costs under Rule 54(d) of the Federal Rules of Civil Procedure. However, the appellate court vacated the denial of attorneys’ fees under the agreement’s fee-shifting provision and remanded for further proceedings on that issue. View "Penthol v. Vertex Energy" on Justia Law

Seville Industries, LLC, a business providing services to the oil and gas sector, applied for a Paycheck Protection Program (PPP) loan during the COVID-19 pandemic. The company included payments to independent contractors in its payroll costs calculation, resulting in a loan amount of $2,578,351. The Small Business Administration (SBA) later reviewed Seville's loan and determined that the inclusion of independent contractor payments was incorrect, leading to a partial forgiveness of the loan amount.The United States District Court for the Western District of Louisiana reviewed Seville's appeal against the SBA's decision. The district court granted summary judgment in favor of the SBA, upholding the decision to deny full loan forgiveness based on the inclusion of independent contractor payments in the payroll costs.The United States Court of Appeals for the Fifth Circuit reviewed the case and affirmed the district court's decision. The court held that the CARES Act's definition of "payroll costs" does not include payments made to independent contractors by businesses. The court emphasized that the statutory text and structure clearly distinguish between payroll costs for employees and income for independent contractors or sole proprietors. The court also rejected Seville's claims that the SBA's interim final rule changed the meaning of "payroll costs" and that the SBA should be equitably estopped from denying full forgiveness. The court concluded that Seville was not entitled to include payments to independent contractors in its payroll costs calculation for PPP loan forgiveness. View "Seville Industries v. SBA" on Justia Law

In November 2023, Media Matters for America, a nonprofit organization, published articles critical of X Corp. and its CEO, Elon Musk, alleging that advertisements from popular brands were placed next to harmful content on the X platform. This led to significant losses for X as advertisers withdrew. X sued Media Matters and its employees in the federal district court for the Eastern District of Texas, alleging interference with contract, business disparagement, and interference with prospective economic advantage. Media Matters moved to dismiss the complaint for lack of personal jurisdiction, improper venue, and failure to state a claim, but the district court denied the motion. Media Matters then sought to certify the personal jurisdiction question for immediate appeal, which was also denied.The district court denied Media Matters' subsequent motion to transfer venue to the Northern District of California, citing untimeliness and a pattern of gamesmanship. Media Matters then filed a petition for writ of mandamus with the United States Court of Appeals for the Fifth Circuit, seeking a venue transfer based on 28 U.S.C. §§ 1404 and 1406.The United States Court of Appeals for the Fifth Circuit reviewed the petition and found that the district court had not properly considered the eight public- and private-interest factors required for a venue transfer analysis. The appellate court granted Media Matters' petition in part, vacated the district court's order denying the transfer, and remanded the case for a proper venue analysis. The court also held Media Matters' interlocutory appeal in abeyance pending the resolution of the remand. View "In Re: Media Matters for America" on Justia Law

Raymond Vuoncino, a corporate-finance professional, worked for U.S. Pipe Fabrication, LLC (Fabrication). After Fabrication implemented new accounting practices for inter-company sales, Vuoncino objected to these practices as potentially fraudulent. Subsequently, he was fired by an executive of Fabrication’s parent company, Forterra, Inc. Vuoncino sued Fabrication, Forterra, and two Forterra executives, alleging violations of the Sarbanes-Oxley Act’s anti-retaliation provision.The United States District Court for the Northern District of Texas dismissed Vuoncino’s first amended complaint for failure to state a claim, denied his motion for leave to amend his complaint, and denied reconsideration of those orders. Vuoncino appealed these decisions.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court affirmed the district court’s denial of Vuoncino’s motion for leave to file a second amended complaint, finding the proposed amendments were time-barred and did not relate back to the original complaint. The court also affirmed the district court’s denial of reconsideration, noting that Vuoncino’s motion rehashed previously rejected arguments and did not present newly discovered evidence.However, the Fifth Circuit reversed the district court’s dismissal of the Sarbanes-Oxley Act claim against Fabrication, concluding that Vuoncino’s first amended complaint plausibly alleged that Fabrication employed him. The court found that Vuoncino’s allegations, taken as true, were sufficient to raise a plausible inference that he was a Fabrication employee. The court affirmed the dismissal of the Sarbanes-Oxley Act claims against Forterra, Bradley, and Kerfin, as Vuoncino failed to sufficiently plead that these defendants were his employer’s alter ego or that he could sue Forterra directly without establishing an employment relationship.The Fifth Circuit affirmed in part, reversed in part, and remanded the case for further proceedings. View "Vuoncino v. Forterra" on Justia Law

In 2006, Cabot Oil & Gas Company began fracking in Dimock Township, Pennsylvania. By 2009, their operations caused a residential water well explosion, leading to methane gas contamination in local water supplies. The Pennsylvania Department of Environmental Protection (DEP) found Cabot in violation of environmental laws, resulting in the 2009 Consent Order, which mandated corrective actions and a $120,000 penalty. Cabot violated this order by 2010, leading to another consent order and additional fines. Over the next decade, Cabot received numerous violation notices and faced lawsuits, including a 2020 grand jury finding of long-term indifference to remediation efforts, resulting in criminal charges and a nolo contendere plea.Shareholders filed a derivative suit against Cabot’s directors, alleging breaches of fiduciary duties, including failure to oversee operations, issuing misleading statements, and insider trading. The United States District Court for the Southern District of Texas dismissed the claims, finding no serious oversight failure or bad faith by the directors, and insufficient particularized allegations to support claims of material misrepresentation or insider trading.The United States Court of Appeals for the Fifth Circuit reviewed the case de novo. The court affirmed the district court’s dismissal, agreeing that the directors had implemented and monitored compliance systems, and that the shareholders failed to demonstrate bad faith or conscious disregard of duties. The court also found that the statements in Cabot’s disclosures were not materially misleading and that the shareholders did not adequately plead demand futility regarding the insider trading claim. Thus, the court upheld the dismissal of all claims with prejudice. View "Ezell v. Dinges" on Justia Law

The case involves a dispute arising from alleged breaches of a partnership agreement between PNC Bank, N.A., Columbia Housing SLP Corporation (collectively, the "PNC Parties"), and Rene O. Campos, along with 2013 Travis Creek GP, LLC, as general partner. The partnership was formed to acquire, construct, develop, and operate an affordable housing apartment complex in Austin, Texas, with anticipated federal tax credits. A mechanic’s lien was placed on the property, leading to a default on the construction loan. The PNC Parties sought to remove the general partner and replace it with Columbia, resulting in a lawsuit.The PNC Parties filed the lawsuit in the United States District Court for the Western District of Texas, invoking diversity jurisdiction. The district court retained supplemental jurisdiction over the enforcement of the settlement agreement that resolved the 2017 lawsuit. In 2021, the Eureka Parties moved to re-open the case to enforce the settlement agreement, leading to competing motions to enforce. The district court severed the motions from the original lawsuit, creating a new case, and granted each motion in part, offsetting the balance owed. The Eureka Parties and the Partnership appealed.The United States Court of Appeals for the Fifth Circuit reviewed the case and found that the parties failed to establish an independent jurisdictional basis for the severed motions. The court noted that severed claims must have an independent jurisdictional basis and that the record lacked sufficient evidence to establish diversity of citizenship. Consequently, the court remanded the case to the district court for the limited purpose of determining whether such jurisdiction exists. The panel retained jurisdiction over the limited remand. View "PNC Bank v. 2013 Travis Oak Creek" on Justia Law