Justia Business Law Opinion Summaries

Articles Posted in US Court of Appeals for the Second Circuit
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Plaintiff Joseph Kasiotis filed a class action lawsuit on behalf of himself and other similarly situated New York consumers against the New York Black Car Operators’ Injury Compensation Fund, Inc. (the “Fund”). The lawsuit alleged that the Fund improperly collected a surcharge on noncash tips paid by passengers to drivers providing livery or “black car” services from January 2000 until February 1, 2021. The United States District Court for the Southern District of New York ruled in favor of Kasiotis and the class, granting summary judgment on the unjust enrichment claim. On appeal, the United States Court of Appeals for the Second Circuit held that the Fund was statutorily permitted to collect a surcharge on noncash tips. The court's ruling was based on Article 6-F of the New York Executive Law, which unambiguously authorizes the Fund to impose a surcharge on noncash tips paid in connection with covered black car services. As such, the Second Circuit Court reversed the district court's order granting summary judgment in favor of Kasiotis and the class, and remanded the case with instructions to dismiss the unjust enrichment claim. View "Kasiotis v. N.Y. Black Car Operators' Inj. Comp. Fund, Inc." on Justia Law

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In a putative securities-fraud class action, Union Asset Management Holding AG and Teamsters Local 710 Pension Fund (the “Investors”), co-lead plaintiffs, alleged that Philip Morris International Inc. (“PMI”) and several of its current and former executives (the “Defendants”) made false and misleading statements about PMI’s “IQOS” smoke-free tobacco products. The United States Court of Appeals for the Second Circuit affirmed the district court's dismissal of the Investors' complaints. The court found that PMI's statements about its scientific studies complied with a methodological standard and were properly analyzed as statements of opinion, rather than fact. The court also determined that the Defendants' interpretation of scientific data, which was ultimately endorsed by the Food and Drug Administration (FDA), was per se reasonable as a matter of law. Further, the court held that the Investors had either failed to plead material falsity or abandoned their challenges on appeal regarding PMI’s statements about its projections for IQOS’s performance in Japanese markets. Finally, the court concluded that the Investors' claim for control-person liability under section 20(a) of the Exchange Act also failed because they had not established a primary violation by the controlled person. View "In re Philip Morris Int'l Inc. Sec. Litig." on Justia Law

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In this case, a joint venture between Watershed Ventures, LLC and Patrick M. McGrath failed, leading to bankruptcy and litigation. McGrath and two investment vehicles he controlled sought coverage from Watershed's insurer, Scottsdale Insurance Company, under a directors and officers liability policy. Scottsdale denied coverage and sought a declaratory judgment as to its coverage obligations. McGrath countered with claims against Scottsdale and third-party claims against Watershed. The district court issued two summary judgment decisions. The first ruled that McGrath is an insured under the policy, while the second dismissed one of McGrath's counterclaims. The parties agreed to a "Stipulated Conditional Final Judgment Subject to Reservation of Rights of Appeal," which would become void if either of the district court’s two summary judgment rulings were partly vacated or reversed on appeal. The parties appealed, but the U.S. Court of Appeals for the Second Circuit dismissed both Scottsdale's appeal and McGrath's cross-appeal for lack of appellate jurisdiction, concluding that the Stipulated Conditional Final Judgment was not a "final decision" under 28 U.S.C. § 1291. The court reasoned that the Stipulated Conditional Final Judgment did not resolve all claims of all parties, was not entered under Federal Rule of Civil Procedure 54(b), and did not finally resolve whether Scottsdale breached its duty to defend under the policy. View "Scottsdale Ins. Co. v. McGrath" on Justia Law

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The case involved a group of firearm and ammunition dealers and a business organization who appealed a decision by the United States District Court for the Northern District of New York. The appellants claimed that New York's commercial regulations on the sale of firearms and ammunition violated their customers' Second Amendment rights and that several provisions of New York law conflicted with federal law. Additionally, they claimed they lacked standing to challenge New York’s licensing scheme for semiautomatic rifles, its background-check requirement for ammunition purchases, and its firearm training requirement for concealed-carry licenses. The United States Court of Appeals for the Second Circuit affirmed the district court's decision, holding that the appellants failed to present evidence to support their claims. The court also affirmed that the appellants lacked standing to challenge the regulations as individuals. View "Gazzola v. Hochul" on Justia Law

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Defendants-Appellants Nuveen Floating Rate Income Fund, Nuveen Floating Rate Income Opportunity Fund, Nuveen Short Duration Credit Opportunities Fund, Nuveen Global High Income Fund, Nuveen Senior Income Fund, and their trustees (collectively, “Nuveen”) appealed from a final judgment entered in favor of Plaintiffs-Appellees Saba Capital CEF Opportunities, Ltd. and Saba Capital Management, L.P. (collectively, “Saba”). The district court granted summary judgment for Saba, declaring it unlawful and rescinding an amendment to Nuveen’s investment company bylaws that restricts shareholders from voting shares acquired above specified levels of ownership. On appeal, Nuveen challenged Saba’s Article III standing and the district court’s judgment with respect to the legality of Nuveen’s amendment. Nuveen argues that Saba lacks standing because Saba has not alleged, or supported with evidence, an actual or imminent injury that is concrete.   The Second Circuit affirmed. The court explained that Section 12(d)(1) says nothing about the proper interpretation of the ICA’s meaning of “voting stock” and “voting security.” That Congress has imposed, in another section of the ICA, voting conditions and exceptions on presumptively unlawful acquisitions does not permit Nuveen to impose its own more extreme vote-stripping measures directly at odds with Section 18(i)’s language. Further, the court explained that Nuveen points to Section 1(b)(4), which reflects Congress’s concern over investment companies that are “inequitably distributed” and “unduly concentrated through pyramiding or inequitable methods of control.” But Congress directly addressed those concerns in other provisions of the ICA, which restricts investment company acquisitions. View "Saba Cap. CEF Opportunities 1, Ltd., Saba Cap. Mgmt., L.P. v. Nuveen" on Justia Law

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Plaintiffs-appellants Marc Kirschner, as the Litigation Trustee for the Nine West Litigation Trust representing unsecured creditors, and Wilmington Savings Fund, FSB, as successor Indenture Trustee for various notes issued by Nine West (together, the "Trustees"), brought seventeen actions in different states against Jones Group's former directors and officers for unjust enrichment and against its former public shareholders for fraudulent conveyance. Both the public shareholders and the directors and officers moved to dismiss the claims against them, arguing that payments made to them in connection with the merger are shielded by the Bankruptcy Code's Section 546(e) safe harbor. The district court granted both motions to dismiss, holding that the payments were shielded by the safe harbor. Plaintiffs appealed.   The Second Circuit affirmed in part, vacated in part, and remanded. The court explained that Congress enacted Section 546(e) safe harbor to promote finality and certainty for investors by limiting the circumstances under which securities transactions could be unwound by, for example, a successful fraudulent conveyance action. The court wrote that to further expand the scope of Section 546(e) and Section 101(22)(A) and immunize transactions in which a bank took only purely ministerial action, made no payments, and had no discretion would not further Congress's purpose. Accordingly,  the court vacated the district court's judgment to the extent it dismissed the Payroll Transfer claims. View "In re: Nine West LBO Sec. Litig." on Justia Law

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Plaintiff filed a putative shareholder class action complaint in New York State Supreme Court, alleging Maryland state law claims on behalf of himself and all similarly situated preferred stockholders of Cedar Realty Trust, Inc. (“Cedar”), a New York-based corporation incorporated in Maryland, following its August 2022 merger with Wheeler Real Estate Investment Trusts, Inc. (“Wheeler”) (collectively, “Defendants”). The complaint alleged Cedar and its leadership breached fiduciary duties owed to, and a contract with, shareholders such as Plaintiff and that Wheeler both aided and abetted the breach and tortiously interfered with the relevant contract. The Defendants collectively removed the case, invoking federal jurisdiction under the Class Action Fairness Act (CAFA), but the district court remanded the case to state court after Krasner argued that an exception to CAFA jurisdiction applied to his claims.   The Second Circuit dismissed Defendants’ appeal and concluded that the “securities-related” exception applies. The court explained that here, the securities created a relationship between Cedar and Plaintiff that gave rise to fiduciary duties on the part of Cedar and the potential for additional claims against those parties who aid and abet Cedar’s breach of those duties. Thus, the aiding and abetting claim—and by the same logic, the tortious interference with contract claim—“seek enforcement of a right that arises from an appropriate instrument.” As such, the securities-related exception applies, and the district court properly remanded the case to state court. View "Krasner v. Cedar Realty Trust, Inc." on Justia Law

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Defendant-Appellant Aron Govil engaged in several fraudulent securities offerings through his company, Cemtrex. Pursuant to a settlement agreement with Cemtrex, Govil agreed to pay back the proceeds of his fraud in part by surrendering his Cemtrex securities to the company. The district court later granted a motion by the SEC for additional disgorgement. The district court concluded that disgorgement was authorized and that the value of the securities Govil surrendered to Cemtrex should not offset the disgorgement award. Govil argues that neither U.S.C. Section 78u(d)(5) nor 15 U.S.C. § 78u(d)(7) authorize disgorgement here.   The Second Circuit vacated the judgment of the district court and remanded with instructions to determine whether the defrauded investors suffered pecuniary harm. The court explained that the Second Circuit recently held that the disgorgement remedies under Section 78u(d)(5) and Section 78u(d)(7) are subject to the “traditional equitable limitations” that the Supreme Court recognized in Liu v. SEC, 140 S. Ct. 1936 (2020). SEC v. Ahmed, 72 F.4th 379, 396 (2d Cir. 2023). One of those equitable limitations is that disgorgement must be “awarded for victims.” Liu, 140 S. Ct. at 1940. Further, the court wrote that a wrongdoer makes a payment in satisfaction of a disgorgement remedy when he returns the property to a wronged party. Accordingly, if on remand, the district court decides that disgorgement is authorized, it must value the surrendered securities and credit that value against the overall disgorgement award. View "SEC v. Govil" on Justia Law

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Defendant-Appellant Petróleos de Venezuela, S.A. (“PDVSA”), an oil company wholly owned by the Bolivarian Republic of Venezuela, entered into two Note Agreements and a Credit Agreement with the predecessor-in-interest to now-Plaintiff-Appellee Red Tree Investments, LLC (“Red Tree”). PDVSA became delinquent on its obligations under the contracts. Red Tree’s predecessor-in-interest accelerated the outstanding debt. Then Red Tree initiated these actions in Supreme Court, New York County, which Defendants removed to district court. PDVSA claimed that any further payment under the Agreements was impossible and should therefore be excused. The district court granted summary judgment against PDVSA on the grounds that PDVSA had failed to provide sufficient evidence that payment was impossible or in the alternative, that any impediment to payment was not reasonably foreseeable. It therefore entered judgment in favor of Red Tree and imposed post-judgment interest. On appeal, PDVSA contends that the district court erred in concluding that no reasonable trier of fact could find that payment was impossible or that U.S. sanctions were unforeseeable. PDVSA further asserts that the district court incorrectly calculated post-judgment interest.   The Second Circuit affirmed. The court agreed with the district court that payment by PDVSA was not impossible. Further, the court concluded that the district court did not err in its calculation of post-judgment interest. The court explained that under the plain language of the Note and Credit Agreements, the outstanding principal and interest that accrued prejudgment—including both default and ordinary interest—are subject to default interest post-judgment. View "Red Tree Investments, LLC v. PDVSA, Petróleo" on Justia Law

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In January 2017, Defendant-Appellant Petróleos de Venezuela, S.A. (“PDVSA”), an oil company wholly owned by the Bolivarian Republic of Venezuela, entered into a Note Agreement with then-Plaintiff-Appellee Dresser-Rand Company. PDVSA made two of the twelve payments due under the Note Agreement in April and July 2017 but failed to make any subsequent payments. In February 2019, Dresser-Rand declared PDVSA to be in default, accelerated the debt, and initiated this action in Supreme Court, New York County, which Defendants removed to the district court. PDVSA claimed that any further payment was impossible and should therefore be excused. The district court concluded that PDVSA had failed to prove that repayment was impossible. It therefore entered judgment in favor of Dresser-Rand. On appeal, PDVSA contends that the district court erred in concluding that payment was not impossible. PDVSA further asserts that the district court incorrectly calculated post-judgment interest.   The Second Circuit affirmed. The court agreed with the district court that payment by PDVSA was not impossible, and the court further concluded that PDVSA forfeited any arguments relating to post-judgment interest. The court explained that the evidence demonstrates that PDVSA never attempted payment to a different bank or in an alternative currency, nor did it investigate whether this manner of payment would have been truly impossible. Instead of the evidence shows, did nothing. PDVSA cannot benefit from the impossibility defense on speculation. View "Siemens Energy, Inc. v. PDVSA" on Justia Law