Justia Business Law Opinion Summaries

Givaudan SA, a Swiss multinational manufacturer of flavors and fragrances, entered into a business relationship with Conagen Inc., a Massachusetts-based synthetic biology company. In 2016, the two companies executed a term sheet outlining several potential transactions, including Givaudan's purchase of a 5% equity stake in Conagen for $10 million and an exclusivity agreement for Conagen's intellectual property. Givaudan paid the $10 million and received the shares, but negotiations on the exclusivity agreement failed.Givaudan sued Conagen in the United States District Court for the Southern District of New York, claiming breach of contract, promissory estoppel, and unjust enrichment, seeking the return of its $10 million. After a bench trial, the district court found Conagen not liable on all claims and dismissed the case. Givaudan appealed the dismissal of its breach of contract claim.The United States Court of Appeals for the Second Circuit reviewed the case. The court affirmed the district court's decision, holding that Givaudan failed to prove damages, an essential element of a breach of contract claim under Delaware law. The court found that the $10 million payment for the 5% equity stake was a completed transaction and not contingent on the successful negotiation of the exclusivity agreement. The court also determined that the term sheet was a binding preliminary agreement that established a duty to negotiate in good faith, but Givaudan did not incur any costs or expenses that would qualify as reliance damages. Thus, the judgment of the district court was affirmed. View "Givaudan v. Conagen" on Justia Law

Sealed Appellant 1, the former CEO of a publicly traded company, and Sealed Appellants 2 and 3, a lawyer and law firm that represented him and the company, appealed an order from the United States District Court for the Southern District of New York. The district court compelled Sealed Appellants 2 and 3 to produce documents withheld under attorney-client privilege in response to grand jury subpoenas. The court found that the crime-fraud exception to attorney-client privilege applied, as there was probable cause to believe that communications between Sealed Appellants 1 and 2 were made to criminally circumvent the company’s internal controls.The district court concluded that the company had an internal control requiring its legal department to review all significant contracts. It found that Sealed Appellant 1 and Sealed Appellant 2 concealed settlement agreements with two former employees who had accused Sealed Appellant 1 of sexual misconduct. These agreements were not disclosed to the company’s legal department or auditors, violating internal controls and resulting in false statements to auditors.The United States Court of Appeals for the Second Circuit reviewed the case. It first determined that it had jurisdiction under the Perlman exception, which allows for immediate appeal when privileged information is in the hands of a third party likely to disclose it rather than face contempt. On the merits, the court found no abuse of discretion in the district court’s application of the crime-fraud exception. It held that there was probable cause to believe that the communications were made to circumvent internal controls, thus facilitating or concealing criminal activity. Consequently, the Second Circuit affirmed the district court’s order compelling the production of the documents. View "In Re: Grand Jury Subpoenas Dated September 13, 2023" on Justia Law

Shanda Games Limited, a video game company registered in the Cayman Islands, issued proxy materials as part of a freeze-out merger. The lead plaintiff, David Monk, alleged that these materials were materially misleading, causing him to accept the merger price instead of exercising his appraisal rights. The United States District Court for the Southern District of New York dismissed Monk’s claims, stating he failed to properly allege loss causation.The district court found that Monk had adequately pleaded that Shanda made two material misstatements but ruled that Monk had failed to plead reliance because the market in ADS was not efficient after the merger announcement. The court also held that the statements about the merger's fairness were inactionable opinions. Monk's motion for reconsideration was denied in part and granted in part, and his motion to add another lead plaintiff was denied. Monk filed a second amended complaint, which was again dismissed for failure to state a claim.The United States Court of Appeals for the Second Circuit reviewed the case and held that the district court erred in dismissing Monk’s claims. The appellate court concluded that Monk adequately alleged material misstatements, including the preparation of financial projections, the projections themselves, and the fairness of the merger. The court also found that Monk adequately pleaded scienter, reliance, and loss causation. The court affirmed in part, vacated in part, and remanded the case for further proceedings. View "In re Shanda Games Ltd. Securities Litigation" on Justia Law

F5, a Cayman Islands corporation that invests in international shipping companies, filed a shareholder derivative action on behalf of Star Bulk, a global shipping company, alleging that individual members of Star Bulk's board and affiliated entities improperly exploited their control over the corporation in executing three separate transactions. F5's complaint included four causes of action, three of which were derivative and one of which purported to be a direct class-action claim for wrongful equity dilution. In this case, F5 did not seek intracorporate remedies by making a pre-suit demand on Star Bulk's board of directors. The district court dismissed the complaint, concluding that the dilution claim was properly derivative under Delaware law and that F5 failed to plead demand futility under Federal Rule of Civil Procedure 23.1(b)(3)(B), as to any of the claims. The court affirmed, concluding that F5's dilution claim was properly derivative, not direct; the district court had subject matter jurisdiction to adjudicate the non-class, derivative claims; and F5 did not allege facts sufficient to excuse it from making a pre-suit demand. View "F5 Capital v. Pappas" on Justia Law

Plaintiffs, unsuccessful bidders in a bankruptcy proceeding, appealed the district court's dismissal of their suit alleging claims for breach of fiduciary duty, tortious interference, and common law fraud against the law firm K&L Gates, LLP and two of its former partners. Plaintiffs alleged that defendants used their prior representation of plaintiffs to undermine plaintiffs' attempt to acquire assets in a bankruptcy sale.  The district court granted defendants' motion to dismiss based on res judicata. The court agreed with plaintiffs that they could not have brought their claims during the bankruptcy proceedings, and that this present action would not disturb the orders of the bankruptcy court. The court explained that the circumstances in this case did not demand that plaintiffs raise their claim in the bankruptcy proceeding, and noted that the relevant issues were not litigated through an adversary proceeding or otherwise. Accordingly, the court reversed and vacated, remanding for further proceedings. View "Brown Media Corp. v. K&L Gates, LLP" on Justia Law

Carrington appealed the district court's judgment requiring them to pay plaintiff, the indirect purchaser and assignee of a limited prejudgment interest in defendants' fund, damages plus prejudgment interest for breach of the limited partnership agreement. Defendants principally contend that the district court erred in its interpretation of the agreement and should have granted summary judgment in their favor on the issue of liability. Defendants argue that, in any event, permitting plaintiff to withdraw from the fund would have precipitated a sale of fund assets at distressed prices, making it impossible for plaintiff to receive more than a minuscule distribution, if any. The court rejected defendants' challenges to the district court's ruling on the issue of liability. However, the court concluded that there were factual issues to be tried as to the calculation of damages. Accordingly, the court vacated and remanded for further proceedings. View "Umbach v. Carrington Investment Partners (US)" on Justia Law

TAL challenges the district court's grant of summary judgment to the Chugh Defendants. The district court held that TAL's claims for breach of fiduciary duty by Chugh had previously been determined in Chugh's favor in a prior proceeding and thus TAL was collaterally estopped from asserting them. The court concluded that Chapter 15 of the Bankruptcy Code does not apply when a court in the United States simply gives preclusive effect to factual findings from an otherwise unrelated foreign liquidation proceeding, as was done here; the district court properly applied the doctrine of collateral estoppel where the affirmative defenses in the wind-up proceeding are based in substance on the same allegations made in the Third Amended Complaint; TAL's contention that findings of fact made by the Cayman court cannot have preclusive effect in the district court proceeding are meritless; and TAL's comity argument also lacks merit. Accordingly, the court affirmed the judgment. View "Trikona Advisers Limited v. Chugh" on Justia Law

Defendant, a marketer of over-the-counter pregnancy test kits, was found liable for false advertising in violation of section 43(a) of the Lanham Act, 15 U.S.C. 1125(a). Plaintiff, a leading competing marketer of over-the-counter pregnancy test kits, claimed that, in informing the user as to how long her pregnancy had been in effect, defendant’s product communicated the false impression that it uses the same metric and gives the same number of weeks of pregnancy as a medical professional would do. The district court found in favor of plaintiff and imposed an injunction on defendant. The court agreed with the district court that plaintiff's Lanham Act claim is not precluded by the Food, Drug, and Cosmetic Act, 21 U.S.C. 301 et seq., claim; there is no error in the district court's finding of falsity in defendant's Launch Package and advertising messages associated with it by reason of their unambiguous implication that defendant’s product measures weeks-pregnant in a manner that is consistent with the measurement used by doctors; agreed with the district court's finding, based on survey evidence, that the message communicated by the Revised Package was impliedly false; there was no error in the district court’s findings that the falsity was material and injurious to plaintiff; and the court did not abuse its discretion in issuing the injunction. Accordingly, the court affirmed the judgment. View "Church & Dwight Co. v. SPD Swiss Precision Diagnostics" on Justia Law

This case concerns a lease and a purported joint venture agreement entered into between defendant and his now-deceased father, the former president and majority shareholder of a real estate development corporation. The lease granted defendant control over a multi-million-dollar property for a period of 20 years in exchange for a payment of $20. AHC sought damages for defendant's use and occupancy of the property and a judgment declaring the lease and joint venture agreement void. Defendant counterclaimed. The district court granted AHC’s motion for partial summary judgment on its declaratory judgment claims and denied defendant's requests for additional discovery. The court concluded that the district court did not abuse its discretion in denying defendant's FRCP 56(d) motion seeking more discovery materials where none of the items defendant specifically requested is germane to the issues before the court; the court applied Pennsylvania law to its analysis of the joint‐venture dispute and New York law to the lease dispute; and the district court correctly concluded that the business judgment rule should not apply to the lease and thus the lease was void as a gift or act of corporate waste. As to the joint venture agreement, the court declined to certify the issue of parol evidence to the state court. The court concluded that the parol evidence rule applies in this case and that the integration clause in the lease retains its preclusive effect. Accordingly, the court affirmed the judgment. View "Alphonse Hotel Corp. v. Tran" on Justia Law

Plaintiffs filed a class action suit against defendants, alleging that they charged plaintiffs more than the statutory maximum fees allowed by N.Y. Pub. Health Law 18(2)(d) and (e) for providing copies of plaintiffs' medical records. The district court granted defendants' motions to dismiss the action pursuant to Fed. R. Civ. P. 12(b)(1) on the ground that the complaint alleged that the requested records had been paid for by plaintiffs' attorneys, ruling that the complaint therefore did not plead injury-in-fact to plaintiffs themselves and that plaintiffs lacked Article III standing. The court concluded that, in light of the ordinary principles of agency, the complaint's allegations that each named plaintiff "through [her or his] counsel" "paid" the charges demanded by defendants for providing the records and that "Plaintiffs" bore "the ultimate expense" for those records, plausibly alleged that plaintiffs themselves were injured by the claimed violations of New York law. Because the district court erred in dismissing the suit under Rule 12(b)(1), the court vacated and remanded. View "Carter v. HealthPort Technologies, LLC" on Justia Law