Articles Posted in US Court of Appeals for the First Circuit

by
The First Circuit vacated the judgment of the district court in part ruling in favor of Putnam Investments, LLC and other fiduciaries of Putnam’s defined-contribution 401(k) retirement plan on Plaintiffs’ lawsuit claiming that Defendants breached fiduciary duties to the plan's participants, clarifying several principles for the district court that should guide its subsequent rulings on remand. Plaintiffs, two former Putnam employees who participated in the Plan, brought this lawsuit on behalf of a now-certified class of other participants in the Plan and on behalf of the Plan itself pursuant to the civil enforcement provision of ERISA, see 29 U.S.C. 1132(a)(2), arguing that Defendants offered a range of mutual investments, including Putnam’s mutual funds, without regard to whether such funds were prudent investment options and that Defendants treated Plan participants worse than other investors in Putnam mutual funds. The district court ruled in favor of Defendants. The First Circuit (1) affirmed the district court’s dismissal of Plaintiffs’ prohibited transaction claim under 1106(a)(1)(C), breach of loyalty claim, and disgorgement claim; (2) vacated the court’s dismissal of Plaintiffs’ prohibited transaction claim under 1106(b)(3) and the finding that Plaintiffs failed as a matter of law to show loss; and (3) remanded for further proceedings. View "Brotherston v. Putnam Investments, LLC" on Justia Law

by
The First Circuit addressed questions that were “intricate, entangled, and in some instances novel” in this case implicating Massachusetts law. The questions included (1) whether a non-majority shareholder who also serves as a director can be deemed a controlling shareholder; (2) what effect, if any, shareholder ratification may have with respect to a self-interested transaction; and (3) whether, in the absence of economic loss, equitable disgorgement can be ordered as a remedy for a breach of fiduciary duty. The First Circuit affirmed both the district court’s multi-million-dollar disgorgement order in favor of the plaintiff class and the jury’s take-nothing verdict in favor of Defendant, holding that the district judge committed no reversible error in handling the issues presented in this case. View "MAZ Partners LP v. Shear" on Justia Law

by
The First Circuit affirmed the district court’s judgment affirming the bankruptcy court’s ruling that the largely debt-financed purchase of a family-owned leather manufacturer was not a fraudulent conveyance and was not a violation of the fiduciary duties of the company’s directors. The trustee of a trust established to benefit the creditors of several related insolvent entities filed a complaint alleging that the transaction at issue was a fraudulent conveyance and that the company’s directors were in breach of their fiduciary duties by approving it. The bankruptcy court ruled in the defendants’ favor on every count. The district court affirmed, holding that the bankruptcy court’s factual determinations were not clearly erroneous, and the bankruptcy court found sufficient facts to support its conclusions. View "Development Specialists, Inc. v. Kaplan" on Justia Law

by
The First Circuit affirmed the order of the district court approving a sale of Frank Gangi’s assets and the assets of entities owned by him. The sale was recommended by the receiver, Carl Jenkins, who was appointed by the court to sell those assets for the benefit of Gangi’s creditors. On appeal, Gangi argued that the assets were sold to a fiduciary of the receivership estate and, consequently, that the sale was prohibited, and, alternatively, that the sale was improper and unfair. The First Circuit held (1) despite Jenkins’s arguments, this appeal was not equitably moot; and (2) there was no abuse of discretion in approving the sale, and Gangi’s arguments to the contrary were without merit. View "Jenkins v. Gangi" on Justia Law

by
In this business dispute, Plaintiff K’s Merchandise Mart, Inc. challenged orders by the district judge granting summary judgment for Defendants William Weinstein and Frank Morton and requiring Plaintiff to pay Defendants $35,000 in sanctions. The First Circuit affirmed the summary judgment rulings but vacated the sanctions order and remanded for reconsideration of the sanctions matter, holding (1) summary judgment was properly granted on Plaintiff’s claims for fraudulent inducement, breach of the implied covenant of good faith and fair dealing, and breach of contract; and (2) the judge erred when he ordered sanctions against Plaintiff rather than against its attorneys. View "Eldridge v. Gordon Brothers Group, LLC" on Justia Law

by
Debtors filed voluntary petitions under chapter 11 of the Bankruptcy Code and a motion seeking bankruptcy court approval of an asset purchase agreement (APA), whereby they agreed to seek substantially all of their assets to Buyer. The bankruptcy court approved the APA through a sale order and confirmed Debtors’ proposed plan of reorganization. Appellants, senior executives of Debtor, were then informed that their employment was terminated the day the sale closed. The bankruptcy court found Buyer liable to Appellants under the APA for their severance pay. The district court vacated the judgment against Buyer, finding that Appellants’ claims against Buyer fell outside the bankruptcy court’s statutorily granted jurisdiction. The First Circuit affirmed, holding that the bankruptcy court had no jurisdiction over Appellants’ claims for severance pay from Buyer because the claims were not proceedings which “arise in” the chapter 11 bankruptcy such that they fell within the grant of jurisdiction contained in 28 U.S.C. 1334. View "Quincy Medical Center v. Gupta" on Justia Law