Justia Business Law Opinion Summaries

Defendants Garrett Reed, Reilly Reed, Element Services, LLC, Jhenna Reed, Reedesign Concepts, and Robert Kubistek appealed a district court order remanding this case from federal district court to Colorado state court due to lack of subject matter jurisdiction. Plaintiff Elite Oil Field Enterprises, Inc. (Elite) moved to dismiss the appeal for lack of appellate jurisdiction. Plaintiff Elite was a Colorado corporation formed in March 2012 to provide roustabout services for the oil field industry. Immediately after its formation, Elite formed two subsidiaries: Elite Oil Field Services, Inc. and Elite Oil Field Equipment, Inc. At some point after the formation, Reilly Reed (Reilly) became upset that he only had a 25% ownership interest in Elite and believed that he was entitled to a 50% share. Reilly and his brother Garrett Reed (Garrett), allegedly devised a scheme for Reilly to form, surreptitiously, a competing company known as Element Services, LLC (Element), and for Element to improperly lure away Elite’s customers and employees with the intent of economically harming Elite and rendering Elite unable to continue its operations. As part of the scheme, Reilly filed a civil lawsuit in Colorado federal district court against Elite, its two subsidiaries, his former business partner Dustin Tixier, and business manager Jason Whisenand, alleging in pertinent part, Elite's corporate documents were altered such that Reilly owned only 25% of the total outstanding corporate stock rather than the originally agreed upon 50%. Plaintiffs moved to transfer and consolidate the multiple civil suits and counterclaims to Colorado state court. The Tenth Circuit determined it lacked subject matter jurisdiction over the appeal, thereby granting Elite's motion to dismiss this appeal. View "Elite Oil Field Enterprises v. Reed" on Justia Law

After a boiler exploded at a refinery, the Occupational Safety and Health Administration (OSHA) cited the refinery’s owner, Wynnewood Refining Co., LLC, for violating 29 C.F.R. section 1910.119, which set forth requirements for the management of highly hazardous chemicals. The Occupational Safety and Health Review Commission (the Commission) upheld the violations, noting that the refinery had previously violated section 1910.119, but the prior violations occurred before Wynnewood LLC owned the refinery, and therefore occurred under a different employer. Accordingly, the Commission did not classify the violations as “repeat[] violations” under 29 U.S.C. 666(a), which permitted increased penalties for “employer[s] who willfully or repeatedly violate[]” the regulation. Wynnewood appealed the Commission’s order, arguing that section 1910.119 did not apply to the boiler that exploded. The Tenth Circuit found section 1910.119’s plain text unambiguously applied to the boiler, and affirmed that portion of the Commission’s order upholding the violations. The U.S. Secretary of Labor also appealed the Commission's order, arguing the Commission erred by failing to characterize the violations as repeat violations. To this, the Tenth Circuit agreed Wynnewood was not the same employer as the refinery's previous owner, thus affirming that portion of the Commission's order relating to the repeat violations. View "Scalia v. Wynnewood Refining" on Justia Law

The parties to this appeal were a Bolivian company, Compania de Inversiones Mercantiles S.A. (“CIMSA”), and Mexican companies known as Grupo Cementos de Chihuahua, S.A.B. de C.V. and GCC Latinoamerica, S.A. de C.V. (collectively “GCC”). Plaintiff-appellant CIMSA brought a district court action pursuant to the Federal Arbitration Act to confirm a foreign arbitral award issued in Bolivia against Defendant-appellee GCC. The underlying dispute stemmed from an agreement under which CIMSA and GCC arranged to give each other a right of first refusal if either party decided to sell its shares in a Bolivian cement company known as Sociedad Boliviana de Cemento, S.A. (“SOBOCE”). GCC sold its SOBOCE shares to a third party after taking the position that CIMSA failed to properly exercise its right of first refusal. In 2011, CIMSA initiated an arbitration proceeding in Bolivia. The arbitration tribunal determined that GCC violated the contract and the parties’ expectations. GCC then initiated Bolivian and Mexican court actions to challenge the arbitration tribunal’s decisions. A Bolivian trial judge rejected GCC’s challenge to the arbitration tribunal’s decision on the merits. A Bolivian appellate court reversed and remanded. During the pendency of the remand proceedings, Bolivia’s highest court reversed the appellate court and affirmed the original trial judge. But as a result of the simultaneous remand proceedings, the high court also issued arguably contradictory orders suggesting the second trial judge’s ruling on the merits remained in effect. GCC filed a separate Bolivian court action challenging the arbitration tribunal’s damages award. That case made its way to Bolivia’s highest court too, which reversed an intermediate appellate court’s nullification of the award and remanded for further proceedings. Invoking the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, CIMSA filed a confirmation action in the United States District Court for the District of Colorado. After encountering difficulties with conventional service of process in Mexico under the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents, CIMSA sought and received permission from the district court to serve GCC through its American counsel pursuant to Federal Rule of Civil Procedure 4(f)(3). The district court then rejected GCC’s challenges to personal jurisdiction, holding (among other things) that: (1) it was appropriate to aggregate GCC’s contacts with the United States; (2) CIMSA’s injury arose out of GCC’s contacts; (3) exercising jurisdiction was consistent with fair play and substantial justice; and (4) alternative service was proper. The district court rejected GCC's defenses to CIMSA's claim under the New York Convention. Before the Tenth Circuit Court of Appeals, the Court affirmed the district court: the district court properly determined that CIMSA’s injury arose out of or related to GCC’s nationwide contacts. "The district court correctly decided that exercising personal jurisdiction over GCC comported with fair play and substantial justice because CIMSA established minimum contacts and GCC did not make a compelling case to the contrary." The Court also affirmed the district court's confirmation of the arbitration tribunal's decisions. View "Compania De Inversiones v. Grupo Cementos de Chihuahua" on Justia Law

In 2015, the Government filed a civil action against Neldon Johnson, Gregory Shepard, and Johnson’s three companies: RaPower-3 LLC (“RaPower”), International Automated Systems, Inc. (“IAS”), and LTB1, LLC (“LTB”) (collectively, Defendants). The Government alleged Defendants promoted an abusive tax scheme. Following a bench trial, the district court found for the Government, enjoined the Defendants from further promoting their scheme, and ordered disgorgement of ill-gotten gains. In 2018, the district court appointed a receiver (Appellee) to take control of Defendants' assets and to investigate whether their affiliated entities possessed proceeds from the illicit tax scheme. On the Receiver’s recommendation, the court added 13 nonparty affiliated entities to the Receivership. Six of the added entities (“Appellant Entities”) appeals, arguing the district court included them in the Receivership without providing sufficient due process. Finding the "Receivership Expansion Order" was not immediately appealable because the Appellant Entities did not show the order was final, the Tenth Circuit dismissed the appeal for lack of jurisdiction. View "United States v. RaPower-3" on Justia Law

After a bench trial, a district court decided that Defendants RaPower-3, LLC, International Automated Systems, Inc. (IAS), LTB1, LLC, Neldon Johnson, and R. Gregory Shepard had promoted an unlawful tax scheme. Defendants’ scheme was based on a supposed project to utilize a purportedly new, commercially viable way of converting solar radiation into electricity. There was no “third party verification of any of Johnson’s designs.” Nor did he have any “record that his system ha[d] produced energy,” and “[t]here [were] no witnesses to his production of a useful product from solar energy,” a fact that he attributed to his decision to do his testing “on the weekends when no one was around because he didn’t want people to see what he was doing.” Defendants never secured a purchase agreement for the sale of electricity to an end user. The district court found that Johnson’s purported solar energy technology was not a commercial-grade solar energy system that converts sunlight into electrical power or other useful energy. Despite this, Defendants’ project generated tens of millions of dollars between 2005 and 2018. Beginning in 2006, buyers would purchase lenses from IAS or RaPower-3 for a down payment of about one-third of the purchase price. The entity would “finance” the remaining two-thirds of the purchase price with a zero- or nominal- interest, nonrecourse loan. No further payments would be due from the customer until the system had been generating revenue from electricity sales for five years. The customer would agree to lease the lens back to LTB1 for installation at a “Power Plant”; but LTB1 would not be obligated to make any rental payments until the system had begun generating revenue. The district court found that each plastic sheet for the lenses was sold to Defendants for between $52 and $70, yet the purchase price of a lens was between $3,500 and $30,000. Although Defendants sold between 45,000 and 50,000 lenses, fewer than 5% of them were ever installed. Customers were told that buying a lens would have very favorable income-tax consequences. Johnson and Shepard sold the lenses by advertising that customers could “zero out” federal income-tax liability by taking advantage of depreciation deductions and solar-energy tax credits. To remedy Defendants' misconduct, the district court enjoined Defendants from continuing to promote their scheme and ordered disgorgement of their gross receipts from the scheme. Defendants appealed. Finding no reversible error, the Tenth Circuit affirmed the district court. View "United States v. RaPower-3" on Justia Law

The Town of Castle Rock, Colorado enacted a 7:00 p.m. curfew on commercial door-to-door solicitation. Aptive Environmental, LLC sold pest-control services through door-to-door solicitation and encouraged its salespeople to go door-to-door until dusk during the traditional business week. When Aptive came to Castle Rock in 2017, it struggled to sell its services as successfully as it had in other nearby markets. Blaming the Curfew, Aptive sued Castle Rock for violating its First Amendment rights and sought an injunction against the Curfew’s enforcement. After a bench trial, the district court permanently enjoined Castle Rock from enforcing the Curfew. Castle Rock appealed. After review, the Tenth Circuit concluded Castle Rock failed to demonstrate the Curfew advanced its substantial interests in a direct and material way. View "Aptive Environmental v. Town of Castle Rock" on Justia Law

A federal district court used a Colorado statute governing costs to award more than $230,000 in costs that would not have been allowable under Federal Rule of Civil Procedure 54(d). Disappointed with the outcome of a merger, minority-shareholder Plaintiffs brought a class action against Defendants for breach of contract and fiduciary duties. The parties litigated their dispute for over ten years across proceedings in arbitration and federal court. In the end the district court granted summary judgment in Defendants’ favor, which was affirmed by the Tenth Circuit. Moving for costs under Rule 54(d), the district court awarded the costs under review in this appeal. Because Rule 54(d) fell well within the statutory authorization of the Rules Enabling Act and its displacement of Colorado state law would not impair any state substantive right, the Tenth Circuit held that a federal court exercising diversity jurisdiction has no power to award costs. View "Stender v. Archstone-Smith" on Justia Law

Defendants-Appellants Paragon Contractors Corporation and Brian Jessop (Paragon) appealed a district court’s order, findings of fact and conclusions of law regarding the calculation of back wages. Plaintiff-Appellee United States Secretary of Labor (Secretary) sought to compel Paragon to replenish a fund established to compensate children employed without pay in violation of both the Fair Labor Standards Act (FLSA) and an injunction. Paragon had previously been held in contempt for violating the injunction. On appeal, Paragon contended the district court failed to adhere to the elements of a back wage reconstruction case under Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946). Specifically, Paragon argued the district court erred in: (1) concluding that the Secretary established a prima facie case; (2) imposing an improperly high burden for rebutting the inferences arising from that case and holding that Paragon failed to rebut certain inferences; and (3) declining to apply a statutory exemption. Finding no reversible error, the Tenth Circuit affirmed. View "Scalia v. Paragon Contractors" on Justia Law

Plaintiff XMission, L.C. appealed a district court's dismissal of its claims against Fluent, LLC for lack of personal jurisdiction over Fluent in Utah. Fluent was a Delaware limited liability company with its principal place of business in New York. It described its service as digital marketing; its business model was apparently based on supplying consumer data to businesses. XMission was a Utah limited liability company with its principal place of business in Salt Lake City. As an internet service provider (ISP), it used servers and other hardware that it owned and operated in Utah to provide internet access for its commercial and residential customers. It also provided email hosting and other internet-related services. Any email sent to a domain hosted by XMission would arrive on XMission’s email servers in Utah. XMission’s complaint against Fluent was based on more than 10,000 emails sent from 2015 to early 2018 to more than 1,100 XMission customers in Utah through its servers, allegedly in violation of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act). The emails at issue instructed recipients to follow links that offered to rewards. By clicking the link, the recipient is taken to a Fluent-controlled data-gathering domain that prompts the recipient to enter personal information such as name, age and date of birth, gender, email address, social media activity, zip code, and street address. Fluent apparently collects and aggregates the consumer information and sells this personal data to others to assist them in developing targeted marketing campaigns. The record does not disclose whether the email recipients actually obtain any rewards from the named companies or whether Fluent is compensated in any way by those companies for these emails. After review, the Tenth Circuit remained unpersuaded the offending emails created personal jurisdiction over Fluent in Utah, and thus affirmed the district court's dismissal. View "XMission, L.C. v. Fluent, LLC" on Justia Law

The IRS conducted a civil audit of Peter Hermes, Kevin Desilet, Samantha Murphy, and John Murphy (collectively, the “Taxpayers”) to verify their tax liabilities for their medical- marijuana dispensary, Standing Akimbo, LLC. The IRS was investigating whether the Taxpayers had taken improper deductions for business expenses arising from a “trade or business” that “consists of trafficking in controlled substances.” Claiming to fear criminal prosecution, the Taxpayers declined to provide the audit information to the IRS. This left the IRS to seek the information elsewhere—it issued four summonses for plant reports, gross-sales reports and license information to the Colorado Department of Revenue’s Marijuana Enforcement Division (the “Enforcement Division”), which is the state entity responsible for regulating licensed marijuana sales. In Colorado federal district court, the Taxpayers filed a petition to quash the summonses. The government moved to dismiss the petition and to enforce the summonses. The district court granted the motion to dismiss and ordered the summonses enforced. After review, the Tenth Circuit concluded the Taxpayers failed to overcome the IRS' showing of good faith, and failed to establish that enforcing the summonses would constitute an abuse of process. View "Standing Akimbo, LLC v. United States" on Justia Law