Justia Business Law Opinion Summaries

The Supreme Court affirmed in part and reversed in part the judgment of the appellate court concerning whether a party in default has standing to file a motion for a new trial asserting legal error relating to calculation of damages and whether a court may award treble damages and attorney's fees under Cal. Penal Code 496 in a case involving fraudulent diversion of a partnership's cash distributions, holding the court erred in part.Plaintiff sued Defendants for underpaying him and improperly diverting a partnership's rental income. The trial court entered a default judgment against Defendants, awarding Plaintiff treble damages and attorney's fees. The court of appeal reversed in part, concluding that Defendants had standing and that the trial court improperly awarded treble damages under section 496(c) under the circumstances of this case. The Supreme Court reversed in part, holding that the court of appeal (1) correctly recognized and confirmed Defendants' standing to move for a new trial on the ground that the trial court erred in awarding and calculating damages; and (2) erred in construing section 496(c) to withhold, rather than afford, treble damages and attorney's fees when property "has been obtained in any manner constituting theft." View "Siry Investment, L.P. v. Farkhondehpour" on Justia Law

In negotiations leading up to a merger in which Brookfield Property Partners, L.P. and its affiliates acquired GGP, Inc., Brookfield became concerned over the number of GGP stockholders who might seek appraisal under 8 Del. C. § 262. Brookfield sought to include in the merger agreement an appraisal-rights closing condition that would allow it to terminate the transaction if a specified number of GGP shares demanded appraisal. But a special committee of GGP directors charged with negotiating the terms of the merger agreement opposed this condition, and Brookfield relented. According to former GGP stockholders, GGP’s directors, urged on by Brookfield, structured the merger so that the GGP stockholders’ appraisal rights were eviscerated. The GGP stockholders claimed that, by divorcing the appraisal remedy from the large pre-closing dividend and linking it to a meager “per share merger consideration,” Brookfield and the GGP directors led them to believe that a fair value determination in an appraisal proceeding would be limited to the value of post-dividend GGP. This description of appraisal rights, coupled with other descriptions of how the transaction was to be effected, led the stockholders to believe that their appraisal rights had either been eliminated or so reduced as to be meaningless. And by agreeing to do this, they said, the GGP directors, with the aid of Brookfield, breached their fiduciary duties. The stockholders sued. The Court of Chancery concluded that, because it could consider the pre-closing dividend as a “relevant factor” under the appraisal statute, the defendants’ structuring of the merger did not deny the stockholders their right to seek appraisal. The Delaware Supreme Court reversed the Court of Chancery: "the disclosures, having described the merger and appraisal rights in a confusing manner, did not provide the stockholders the information they needed to decide whether to dissent and demand appraisal. ... it is reasonably conceivable to us that GGP’s directors, aided and abetted by Brookfield, consciously crafted the transaction and the related disclosures in such a way as to deter GGP’s stockholders from exercising their appraisal rights." View "In Re GGP, Inc. Stockholder Litigation" on Justia Law

In a final judgment, the Delaware Court of Chancery ordered NVIDIA Corporation (“NVIDIA” or the “Company”) to produce books and records to certain NVIDIA stockholders under Section 220 of the Delaware General Corporation Law. In the underlying action, the stockholders alleged certain NVIDIA executives knowingly made false or misleading statements during Company earnings calls that artificially inflated NVIDIA’s stock price, and then those same executives sold their stock at inflated prices. As such, the stockholders sought to inspect books and records to investigate possible wrongdoing and mismanagement at the Company, to assess the ability of the board to consider a demand for action, to determine whether the Company’s board members were fit to serve on the board, and to take the appropriate action in response to the investigation. In resisting the request, NVIDIA argued the stockholders were not entitled to the relief they sought because: (1) the scope of the original demands failed to satisfy the form and manner requirements; (2) the documents sought at the trial were not requested in the original demands; (3) the stockholders failed to show a proper purpose; (4) the stockholders failed to show a credible basis to infer wrongdoing; and (5) the requests were overbroad and not tailored to the stockholders’ stated purpose. The Court of Chancery rejected these arguments and ordered the production of two sets of documents—certain communications with the CEO and certain specific sets of emails. The Delaware Supreme Court held: (1) the stockholders’ original demands did not violate Section 220’s form and manner requirements; (2) the stockholders did not expand their requests throughout litigation; (3) the Court of Chancery did not err in holding that sufficiently reliable hearsay evidence may be used to show proper purpose in a Section 220 litigation, but did err in allowing the stockholders in this case to rely on hearsay evidence because the stockholders’ actions deprived NVIDIA of the opportunity to test the stockholders’ stated purpose; (4) the Court of Chancery did not err in holding that the stockholders proved a credible basis to infer wrongdoing; and (5) the documents ordered to be produced by the Court of Chancery were essential and sufficient to the stockholders’ stated purpose. Thus, the judgment of the Court of Chancery is affirmed in part, reversed in part, and remanded for further proceedings. View "NVIDIA Corporation v. City of Westland Police & Fire Retirement System" on Justia Law

A limited liability company (LLC) member sold his interest to another LLC member as part of a settlement agreement, under which funds were to be paid to the selling member and his attorneys. A judgment creditor of the selling member sought a charging order against the settlement funds; meanwhile, the selling member’s attorneys filed an attorney’s lien against the same funds. The superior court granted the charging order and enforced the attorney’s lien, resulting in partial recoveries for the judgment creditor and the attorneys. The judgment creditor appealed, arguing that the attorney’s lien was invalid, or, if valid, should have been prioritized beneath his charging order. The selling member cross-appealed, arguing that the charging order was invalid and, if valid, should have been prioritized beneath the attorney’s lien. Because evidentiary issues prevented the Alaska Supreme Court from determining the validity or extent of the charging order and lien, it remanded the case for the superior court to conduct the appropriate inquiries. View "Duffus v. Baker" on Justia Law

Under Pennsylvania law, a court may appoint a custodian to take control of a corporation if the corporation’s board of directors is deadlocked or if the directors’ acts are illegal, oppressive, fraudulent, or wasteful. The eight-person FRBK Board of Directors became evenly split into two factions until one of the Hill Directors died. The Madonna Directors immediately used their new numerical advantage to start rearranging the bank’s leadership and took steps to fill the Board vacancy with an ally.The Hill Directors sued. Within hours, the district court ordered the Madonna Directors to cease their actions. Nine days later, without an evidentiary hearing or fact-finding, the court appointed a custodian to take control of FRBK and to hold a special shareholders’ meeting to fill the vacant Board seat. The following month, the court – without prompting from any shareholder or Board member – directed the custodian to add a Board seat and to fill that seat at the special shareholders’ meeting.The Third Circuit reversed. The decision to displace the corporate governance structure of a publicly-traded company did not reflect the required caution, circumspection, or justification for such a drastic step. FRBK’s bylaws describe how the Board should proceed after the death of a director. The Madonna Directors followed those instructions. The court abused its discretion by hastily supplanting the Bylaws with its own process. There was no deadlock, illegality, oppression, or any other ground for appointing a custodian. View "Hill v. Cohen" on Justia Law

The Court of Chancery granted summary judgment in favor of Respondents and confirmed a May 10, 2021 arbitration award, holding that this court was obliged to grant Respondents' cross-motion for summary judgment to confirm the award.Respondent commenced an arbitration proceeding against Petitioner asserting several claims relating to amendments to the parties' LLC agreement. After the arbitrator issued decisions, Petitioner filed a petition to vacate the award in part. Respondent and affiliated entities filed a counterclaim to confirm the arbitration award. All parties moved for summary judgment. The Court of Chancery granted summary judgment in favor of Respondents and confirmed the arbitration award, holding that Petitioner's challenges to the award failed. View "Polychain Capital LP v. Pantera Venture Fund II LP" on Justia Law

Tribune and Sinclair announced an agreement to merge. Tribune abandoned the merger and sued Sinclair, accusing it of failing to comply with its contractual commitment to “use reasonable best efforts” to satisfy the demands of the Antitrust Division of the Justice Department and the FCC, both of which could block the merger. Sinclair settled that suit for $60 million; the settlement disclaims liability. While the merger agreement was in place, investors bought and sold Tribune’s stock. In this class action investors alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 by failing to disclose that Sinclair was “playing hardball with the regulators,” increasing the risk that the merger would be stymied.The Seventh Circuit affirmed the dismissal of the suit. The principal claims, which rest on the 1934 Act, failed under the Private Securities Litigation Reform Act of 1995. Questionable statements, such as predictions that the merger was likely to proceed, were forward-looking and shielded from liability because Tribune expressly cautioned investors about the need for regulatory approval and the fact that the merging firms could prove unwilling to do what regulators sought, 15 U.S.C. 78u–5(c)(1)..With respect to the 1933 Act, the registration statement and prospectus through which the shares were offered stated all of the material facts. The relevant “hardball” actions occurred after the plaintiffs purchased shares. “Plaintiffs suppose that, during a major corporate transaction, managers’ thoughts must be an open book." No statute or regulation requires that. View "Arbitrage Event-Driven Fund v. Tribune Media Co." on Justia Law

In 2007, Transit was awarded an exclusive license to bring telecommunications services to 277 New York City subway stations. Transit subcontracted with Fiber-Span, to develop remote fiber nodes to amplify telecommunication signals in the first six subway stations to receive service. Fiber-Span agreed to subsidize certain developmental costs, hoping to be selected as the contractor for the remaining 271 subway stations. Transit agreed that, if Fiber-Span was not selected to supply nodes for the remaining stations, Transit would reimburse those front-loaded costs. The relationship deteriorated. Transit asserted that Fiber-Span remained in breach of contract even after attempts to remediate problems but nevertheless took the network live. Transit insisted that Fiber-Span replace the nodes. Fiber-Span said it would do so only after it was awarded a contract for the remaining stations. Transit continued to use the nodes for two more years, then sued in New York state court. Fiber-Span filed for bankruptcy.The Third Circuit concluded Transit’s decision to keep using the nodes was consistent with the acceptance of non-conforming goods. Fiber-Span breached the contract; the damages must reflect the difference in value between what Transit received and what it was promised, which is less than what the bankruptcy and district courts awarded. Transit was not required to compensate Fiber-Span for not selecting it to provide nodes for the remaining subway stations. Transit’s claim to the payment on Fiber-Span's performance bond is time-barred. View "In re: Fiber-Span Inc" on Justia Law

Triller Inc., a social media company was being sold to a group of owners, including Carnegie Technologies, Inc. Prior to the sale, Triller executed a promissory note in favor of Carnegie and then immediately assigned the note to a group of “legacy” owners—including Carnegie—as part of the deal’s closing. After the note was defaulted, Carnegie sued Triller to collect the amounts due. Triller claimed that it had no obligations under the note because it had been assigned, resulting in novation. The district court rejected Triller's novation defense and Triller appealed.The Fifth Circuit affirmed, finding that the plain meaning of the agreement was silent on the extinction of any obligation between Triller and Carnegie. The laws of both California and Texas require clear evidence illustrating the parties' intent to replace an earlier agreement, and the agreement's merger clause precludes evidence of a contemporaneous or earlier agreement. Thus, the court held that Triller failed to raise an issue of material fact regarding whether its obligations under the note were extinguished. View "Carnegie Technologies. v. Triller" on Justia Law

Plaintiff-Appellant GeoMetWatch Corporation, (“GMW”) appealed several district court orders granting summary judgment to Defendant-Appellees Alan Hall, Erin Housley, Brent Keller, Mark Hurst, Debbie Wade, Island Park Investments, and Tempus Global Data, Inc. (collectively, the “Hall Defendants”); Utah State University Advanced Weather Systems Foundation (“AWSF”) and Scott Jensen (collectively, the “AWSF Defendants”); and Utah State University Research Foundation (“USURF”), Robert Behunin, and Curtis Roberts (collectively, the “USURF Defendants”). The underlying suit arose from the collapse of a venture GMW entered into, created for the purpose of constructing and deploying a satellite-hosted weather sensor system. GMW alleged that all Defendants, led by Hall, conspired to drive GMW out of business on the eve of the venture by stealing its confidential and trade secret information, forming a competing business, and pulling out of agreements that Hall made with GMW. The district court granted summary judgment to the Hall Defendants primarily because of an overarching deficiency in GMW’s case, and in particular, a lack of non-speculative and sufficiently probative evidence of a causal nexus between Defendants’ alleged bad acts and GMW’s asserted damages. The court also granted summary judgment in favor of USURF, AWSF, and Roberts because they were allegedly immune from lawsuit under the Utah Governmental Immunity Act (“UGIA”). The district court granted summary judgment to Jensen and Behunin on all claims, concluding generally that GMW’s showing of causation also was deficient as to them. The court likewise awarded partial summary judgment to AWSF on its breach-of-contract counterclaim against GMW, effectively denying GMW’s cross-motion for summary judgment and affirmative defenses. GMW avers that the district court’s decisions were all made in error. Finding no error, however, the Tenth Circuit affirmed the grants of summary judgment. View "GeoMetWatch, et al. v. Behunin, et al." on Justia Law