Justia Business Law Opinion SummariesArticles Posted in US Court of Appeals for the District of Columbia Circuit
Michael Johnston v. SEC
Petitioner petitioned for review of the Securities and Exchange Commission order granting him a whistleblower award for providing original information leading to successful enforcement action against Citigroup, Inc. Although the SEC agreed the original information Petitioner and his team provided to the Commission warranted an award equal to 15 percent of the fine levied against Citigroup, Petitioner objected to the Commission’s determination that he and his former co-worker were to divide the award equally as joint whistleblowers. The DC Circuit dismissed Petitioner’s petition for want of jurisdiction insofar as he challenges the amount of the award granted to his co-worker. The court denied the petition insofar as it challenges the co-worker’s eligibility for an award because the Commission’s decision was not arbitrary and capricious, or otherwise contrary to law, nor was its finding of fact unsupported by substantial evidence. The court explained that the SEC whistleblower statute does not ask who developed the original information that led to a successful resolution of a covered action; instead, it asks who provided that information to the Commission. The SEC did not err as to the law, nor did it lack substantial evidence as to the facts, in determining that both parties acted as joint whistleblowers when they provided information to the Commission, making the co-worker eligible for an award. View "Michael Johnston v. SEC" on Justia Law
Estate of Jeremy I. Levin v. Wells Fargo Bank, N.A.
These consolidated cases, on appeal from a judgment of the district court, present competing claims to a blocked electronic funds transfer. The parties are the United States, which blocked the transaction because terrorists initiated it. On the other side are victims of Iran-sponsored terrorism who have obtained multimillion-dollar judgments against the Iranian government. After learning of the government’s forfeiture action, attorneys for two groups of victims of Iranian terrorism and their relatives, holding judgments against Iran, filed separate writs of attachment. Plaintiffs sought to attach the funds at Wells Fargo pursuant to two federal statutes. The first, 28 U.S.C. Section 1610(g) of the Foreign Sovereign Immunities Act (“FSIA”). The second is Section 201(a) of the Terrorism Risk Insurance Act of 2002 (“TRIA”). The district court ruled that Iran lacked any property interest in the blocked funds held by Wells Fargo. The court, therefore, quashed Plaintiffs’ writs of attachment. The DC Circuit court reversed and remanded. The court explained that tracing resolves this case in Plaintiffs’ favor. The government admits that the $9.98 million blocked funds at Wells Fargo “are traceable to Taif” and thus to Iran. The premise of the government’s forfeiture action is that the funds are traceable to Iran. The district court, therefore, erred in concluding that Plaintiffs had failed to show that the blocked funds were, under Section 201(a) of the TRIA, the blocked assets of [a] terrorist party. View "Estate of Jeremy I. Levin v. Wells Fargo Bank, N.A." on Justia Law
Local 23, American Federation of Musicians v. National Labor Relations Board
The San Antonio Symphony contracts to perform most of its shows at the Tobin Center. After the Tobin Center barred the Symphony’s musicians from distributing leaflets on the premises, the musicians’ union filed an unfair labor practices charge. The leaflets informed patrons attending a ballet performance that they would not hear a live symphony and encouraged them to insist on live music. The National Labor Relations Board revised its approach and concluded that a property owner has the right to exclude from its property off-duty contractor employees seeking access to the property to engage in Section 7 activity unless those employees work both regularly and exclusively on the property and the property owner fails to show that they have one or more reasonable non-trespassory alternative means to communicate their message.The D.C. Circuit remanded. In aiming to identify those contractor employees with a sufficiently strong connection to the property to warrant the grant of access rights, the Board’s approach was arbitrary, both as to the condition that contractor employees work “regularly” on the property and as to the condition that they also work “exclusively” on the property. On remand, the Board may decide whether to proceed with a version of the test it announced and sought to apply in this case or to develop a new test. View "Local 23, American Federation of Musicians v. National Labor Relations Board" on Justia Law
Finberg v. United States Department of Agriculture
In 2009, Finberg became the Chief Operating Officer of Adams, a produce distributor. Grinstead was Adams’s CEO. In 2011, federal authorities investigated Adams for fraud against the Department of Defense. Finberg claims he was unaware of the scheme until later when suppliers and Adams’s CFO discussed the scheme in front of him. Finberg agreed to gradually end the scheme to avoid further detection. Adams hired a law firm to internally investigate its operations, which revealed that CEO Grinstead had engaged in extensive fraud. PNC Bank froze the business’s accounts; Adams was unable to promptly pay suppliers $10 million. Adams declared bankruptcy. Grinstead pled guilty to wire fraud, misprision of felony, and multiple failures to file tax returns. Finberg pled guilty to misprision of a felony. A disciplinary complaint was filed against Adams with the USDA Agricultural Marketing Service, alleging violation of the Perishable Agricultural Commodities Act, 7 U.S.C. 499b(4), by failing to promptly pay suppliers. The determination that Adams violated the Act triggered the Act’s employment bar for each person who was responsibly connected to the violation.An ALJ found that Finberg was responsibly connected. A USDA Judicial Officer affirmed, finding that Finberg exercised judgment, discretion, or control once he learned of the fraudulent scheme and failed to report. The D.C. Circuit reversed The agency lacked substantial evidence that Finberg’s activities contributed to Adam’’s violation of the Act. View "Finberg v. United States Department of Agriculture" on Justia Law
Klayman v. Judicial Watch, Inc.
Klayman founded Judicial Watch in 1994 and served as its Chairman and General Counsel until 2003. Klayman claims he left voluntarily. Judicial Watch (JW) claims it forced Klayman to resign based on misconduct. During negotiations over Klayman’s departure, JW prepared its newsletter, which was mailed to donors with a letter signed by Klayman as “Chairman and General Counsel.” While the newsletter was at the printer, the parties executed a severance agreement. Klayman resigned; the parties were prohibited from disparaging each other. Klayman was prohibited from access to donor lists and agreed to pay outstanding personal expenses. JW paid Klayman $600,000. Klayman ran to represent Florida in the U.S. Senate. His campaign used the vendor that JW used for its mailings and use the names of JW’s donors for campaign solicitations. Klayman lost the election, then launched “Saving Judicial Watch,” with a fundraising effort directed at JW donors using names obtained for his Senate run. In promotional materials, Klayman asserted that he resigned to run for Senate, that the JW leadership team had mismanaged and the organization, and that Klayman should be reinstated.Klayman filed a complaint against JW, asserting violations of the Lanham Act, 15 U.S.C. 1125(a)(1), by publishing a false endorsement when it sent the newsletter identifying him as “Chairman and General Counsel” after he had left JW. Klayman also alleged that JW breached the non-disparagement agreement by preventing him from making fair comments about JW and that JW defamed him. During the 15 years of ensuing litigation, Klayman lost several claims at summary judgment and lost the remaining claims at trial. The jury awarded JW $2.3 million. The D.C. Circuit rejected all of Klayman’s claims on appeal. View "Klayman v. Judicial Watch, Inc." on Justia Law
Xereas v. Heiss
Plaintiff, who holds the RIOT ACT trademark, entered into a business agreement with defendants to open the Riot Act Comedy Club in downtown D.C. Plaintiff subsequently filed suit to recover damages from defendants' alleged breaches of fiduciary duty and of the operating agreement of the limited liability company the parties formed to start the club. Defendants counterclaimed.The DC Circuit reversed the district court's dismissal of plaintiff's breach of fiduciary duty claim, holding that plaintiff adequately alleged that he and defendants were members of a member-managed LLC and that under D.C. law that suffices to plead the existence of a fiduciary duty. In this case, the district court improperly found it "clear" that a "special confidential relationship transcending an ordinary business transaction did not take place" between the parties. The court explained that the district court failed to consider relevant District of Columbia and Maryland law, the statute's clear imposition of duties of loyalty and care typical of a fiduciary, or the nature of the parties' relationship—as partners and co-managers in a business venture, not merely arms-length parties to a standard commercial transaction. However, plaintiff failed to show that the court should reverse any of the district court's evidentiary rulings. The court affirmed the district court's decision to deny defendants judgment as a matter of law on plaintiff's breach of contract claim and to deny defendants' fee petition. The court remanded for further proceedings. View "Xereas v. Heiss" on Justia Law
K&D LLC v. Trump Old Post Office LLC
Cork Wine Bar, a restaurant that competes with President Trump's eponymous hotel, filed suit alleging violations of the District's common law of unfair competition. Cork alleged that President Trump's hotel attracted more of the lobbyists, advocacy groups, and diplomats that Cork had relied on to fill its events calendars, and that these customers chose the hotel because of a perception that patronizing it would be to their advantage in their dealings with the Trump Administration. After removal, the district court denied Cork's motion to remand, dismissing the complaint for failure to state a claim.The DC Circuit held that the case was properly removed based on its two-step analysis in officer-removal cases. First, the court held that President Trump's theory that the District may not impose legal conditions on the lawful performance of his presidential duties was colorable. Second, the court held that President Trump demonstrated that Cork's suit fell within the scope of 28 U.S.C. 1442(a)(1).The court also held that case law did not support Cork's claims on the merits and that Cork failed to cite any contrary precedent. In this case, Cork suggested in passing that President Trump and the hotel were impairing competition and interfering with access to its business. However, the court explained that these claims bear little resemblance to the examples listed in Ray v. Proxmire and B B & W Mgmt., Inc. v. Tasea Inv. Co. Finally, the court declined to certify the core question of District law to the District of Columbia Court of Appeals. View "K&D LLC v. Trump Old Post Office LLC" on Justia Law
Endeavor Partners Fund, LLC v. Commissioner
The DC Circuit affirmed the tax court's judgment that certain partnership currency option transactions lacked economic substance and were shams designed to look like real world trades without any of the risk or concomitant opportunity for profit. The court held that the tax court did not clearly err in concluding that the parties agreed in advance on the exact rates to be used in determining earnings and losses under the option agreements, together with a related evidentiary point. In this case, the parties fixed the forward exchange rates, ensuring that they could predict the precise amount that the winning and losing trades would pay—and ensuring that the trades had no ex ante profit potential and lacked any other legitimate nontax business purposes. The court rejected the partnerships' remaining claims and held that the tax court did not err in any material respect. View "Endeavor Partners Fund, LLC v. Commissioner" on Justia Law
United States v. AT&T, Inc.
In an action filed by the government to enjoin the vertical merger between AT&T and Time Warner under Section 7 of the Clayton Act, the DC Circuit affirmed the district court's denial of the government's request for a permanent injunction. At issue on appeal was the district court's findings on its increased leverage theory whereby costs for Turner Broadcasting System's content would increase after the merger, principally through threats of long-term "blackouts" during affiliate negotiations.The court held that the government failed to clear the first hurdle in meeting its burden of showing that the proposed merger was likely to increase Turner Broadcasting's bargaining leverage. Furthermore, the government's objections that the district court misunderstood and misapplied economic principles and clearly erred in rejecting the quantitative model were unpersuasive. In this case, the government offered no comparable analysis of data for prior vertical mergers in the industry that showed "no statistically significant effect on content prices" as defendants had. Additionally, the government's expert opinion and modeling predicting such increases failed to take into account Turner Broadcasting System's post-litigation irrevocable offers of no-blackout arbitration agreements, which a government expert acknowledged would require a new model. The court also held that the evidence indicated that the industry had become dynamic in recent years with the emergence of distributors of only on-demand content, such as Netflix and Hulu. View "United States v. AT&T, Inc." on Justia Law
In re: Grand Jury Subpoena
Assuming the Foreign Sovereign Immunities Act's immunity applies, the DC Circuit held that it leaves intact the district courts' subject-matter jurisdiction over federal criminal cases involving foreign sovereigns. The court affirmed the district court's order holding the subpoena's target, a corporation owned by a foreign sovereign, in contempt for failure to comply. In this case, the court held that there was a reasonable probability the information sought through the subpoena at issue concerned a commercial activity that caused a direct effect in the United States. The court held that the Act, even where it applies, allows courts to exercise jurisdiction over such activities and the ancillary challenges in this appeal lacked merit. View "In re: Grand Jury Subpoena" on Justia Law