Justia Business Law Opinion Summaries

In 2013, the New Jersey Supreme Court affirmed the Appellate Division’s holding that Koger Distributed Solutions, Inc. (KDS) and Koger Professional Services, Inc. (KPS) had value as independent entities rather than being solely dependent on their parent company, Koger Inc. (Koger). The Court also held that Robert Sipko’s relinquishment of his 50 percent interests in KDS and KPS in 2006 was void for lack of consideration. The matter was remanded the trial court to determine what, if any, remedy was appropriate to compensate Robert for his interests in KDS and KPS -- companies that were rendered valueless by the time the matter reached the Supreme Court. In 2016, the trial court held that the appropriate remedy was a buyout of Robert’s interests in the companies given the court’s finding that George and Rastislav Sipko deliberately stripped the companies of value for the specific purpose of putting the money beyond Robert’s reach. The trial court accepted Robert’s expert’s valuation of the companies and found that KDS and KPS, at the time Robert filed the complaint in 2007, were worth approximately $1.5 million and $34.9 million, respectively. Accordingly, Robert’s 50 percent ownership in both companies totaled over $18 million, plus interest. On appeal, the Appellate Division agreed that a buyout was the appropriate remedy given the record. The court, however, remanded the matter for the trial court to determine whether a marketability discount should be applied. In light of all the defendants’ conduct regarding KDS and KPS to strip Robert of his rightful interests, “equity cannot abide imposing a marketability discount to the benefit of defendants.” The trial court’s acceptance of Robert’s expert’s valuation of the company fell within its broad discretion and was fully supported by the record. Defendants were given the opportunity to present an expert valuation of the companies on remand but made the strategic decision not to do so. Therefore, the Supreme Court declined to provide defendants with “another bite of this thoroughly chewed apple,” and reinstated the judgment of the trial court. View "Sipko v. Koger, Inc." on Justia Law

The Court of Chancery granted Plaintiff's motion for summary judgment seeking an order confirming the arbitration panel's award in this case and denied Defendants' motion for summary judgment seeking to vacate the award, holding that there was no basis to vacate the arbitration panel's award.Defendants initiated arbitration proceedings against Plaintiff to challenge the validity of unsuitability determination that Plaintiff issued to Defendants under the parties' agreement. The arbitration panel determined that the unsuitability determination was valid. This litigation followed. The Court of Chancery confirmed the arbitration award, holding that Defendants were not entitled to relief on their allegations of error. View "MHP Management, LLC v. DTR MHP Management, LLC" on Justia Law

The Supreme Judicial Court affirmed the judgment of the jury finding that Defendant violated his fiduciary duties to a corporation and converted the corporation's assets for his own benefit, holding that the judge did not err in denying Plaintiff's request for a surcharge and that there were no other prejudicial errors.In this disputed between family members in a closely-held corporation over asserted conversions of corporate funds the corporation and one of its shareholders (collectively, Plaintiffs), brought this action against an officer (Defendant), alleging that the officer diverted money from the corporation for the benefit of himself and his individually-owned corporation. The jury found in favor of Plaintiffs and awarded $1 million in damages to the corporation. The Supreme Judicial Court affirmed, holding (1) a surcharge may be used to award a plaintiff fiduciary the costs of attorney's fees under certain circumstances; (2) the judge did not err in denying Plaintiff's request for a surcharge; and (3) Defendant was not entitled to relief on his remaining claims of error. View "Tocci v. Tocci" on Justia Law

The Texas Legislature limited beer-to-go sales to brewers and manufacturers that produced no more than 225,000 barrels annually “at all premises [they] wholly or partly owned.” Tex. Alco. Bev. Code Ann. Sections 62.122(a) and 12.052(a).   The Texas Alcoholic Beverage Commission (TABC) ordered CANarchy to cease and desist after it determined that CANarchy’s facilities collectively exceeded the 225,000-barrel limit. CANarchy complied with the order but then filed suit, seeking a declaratory judgment that the 225,000- barrel threshold did not apply to barrels produced at leased premises. The district court agreed with CANarchy that “premises wholly or partly owned” do not include leased premises and granted it summary judgment.   The Fifth Circuit affirmed the district court’s order granting Plaintiff’s motion for a declaratory judgment. The court held that “premises wholly or partly owned” do not include leased premises and granted it summary judgment.   The court wrote, “it is the Legislature’s prerogative to enact statutes; it is the judiciary’s responsibility to interpret those statutes according to the language the Legislature used, absent a context indicating a different meaning or the result of the plain meaning of the language yielding absurd or nonsensical results.” Here, the ordinary definition of “owned,” when applied to sections 12.052(a) and 62.122(a) of the Texas Alcoholic Beverage Code, establishes that the 225,000-barrel production threshold set in those statutes encompasses only barrels produced at premises owned by the brewer, either in whole or in part, and not at premises leased by the brewer. View "CANarchy Craft Brewery v. Texas Alcoholic" on Justia Law

Warren Averett Companies, LLC, sought a writ of mandamus to direct a circuit court to vacate its order denying Warren Averett's motion to strike the jury demand asserted by Gerriann Fagan and to enter an order granting the motion to strike the jury demand. The underlying dispute involved a business proposition Warren Averett made to Fagan to to build a human-resources consulting practice. Fagan would wind down the operations of her company, The Prism Group; Fagan would then become a member of Warren Averett, and Warren Averett would purchase The Prism Group's equipment and furniture, assume responsibility for The Prism Group's leases; and that Warren Averett would assume The Prism Group's membership in Career Partners International, LLC. The "Standard Personal Service Agreement" ("the PSA") entered into by Fagan and Warren Averett drafted by Warren Averett included, in pertinent part, a dispute-resolution clause. Fagan resigned from Warren Averett after a salary dispute, and, on February 28, 2019, Fagan filed a demand for arbitration with the American Arbitration Association ("AAA"). The AAA determined that, under its rules, Fagan owed $300 and Warren Averett owed $1,900. The AAA also stated that any dispute regarding the filing fees should be raised before the arbitrator for a determination once all the filing requirements, including payment of the fees, had been satisfied. Warren Averett refused to pay its share of the filing fees as requested by the AAA, and the AAA closed the file in the matter. Thereafter, Fagan sued Warren Averett alleging multiple causes of action. Fagan demanded a jury trial. Warren Averett moved to dismiss the claims, and concurrently moved to compel arbitration. The Alabama Supreme Court determined Fagan did not show prejudice by the almost two-year delay between the filing of Fagan's amended complaint and the filing of Warren Averett's motion to strike the jury demand: "The trial court granted Warren Averett's motion to compel arbitration, and Fagan sought review of that decision. We reversed that decision; on remand, the trial court set a scheduling conference, and Warren Averett filed its motion to strike Fagan's jury demand. Although there was a delay between the time that Fagan demanded a jury and the time that Warren Averett sought to strike that demand, Fagan has not shown that she was prejudiced by that passage of time." Warren Averett's petition was granted and the writ issued. View "Ex parte Warren Averett Companies, LLC." on Justia Law

The Supreme Court answered certified questions asking whether Tex. Alco. Bev. Code 22.16(f) continues to exempt a public corporation if that corporation sells some or all of its shares to a non-exempt corporation and, if so, whether the exempt corporation can acquire additional package store permits, holding that the answer to those questions is yes.In 1995, the legislature prohibited public corporations from owning or holding an interest in package store permit and, at the same time, exempted from this prohibition any public corporation that, as of April of that year, already had permits or had permit applications pending. The Court of Appeals of the Fifth Circuit certified questions about the scope of the exemption. The Supreme Court answered both questions in the affirmative, holding that an exempt corporation in which a non-exempt corporation has an interest cannot hold a package store permit. View "Gabriel Investment Group, Inc. Texas Alcoholic Beverage Commission" on Justia Law

In this challenge to a share issuance the Supreme Court held that the probate court improperly submitted an invalid theory of liability to the jury and that the trial court's charge error probably caused the rendition of an improper judgment.In the weeks before he died, Dick Poe, the sole director of Poe Management, Inc. (PMI), authorized the corporation to issue new shares and then bought the new shares for $3.2 million, making him the majority owner of PMI. Dick's death vested control of the family-owned car-dealership enterprise in the two co-executors of Dick's estate. Richard, Dick's son and PMI's only other shareholder, brought this action challenging the share issuance as a breach of Dick's fiduciary duty. The trial court rendered judgment in favor Richard. The Supreme Court reversed and remanded the case for a new trial, holding that the probate court erred in charging the jury in two respects and that the errors were harmful. View "In re Estate of Poe" on Justia Law

The Supreme Court dismissed this appeal from the order of the district court finding that the recommendation of a single-member special litigation committee, which was appointed to investigate and determine whether it was in an LLC's best interests to pursue a certain derivative action, was beyond the committee's statutory authority, holding that the court's order was not a final order under Neb. Rev. Stat. 25-1902.A minority shareholder brought suit in a derivative action on behalf of the manager-managed limited liability company at issue in this case. The committee appointed by Defendants determined that it was in the LLC's best for the derivative action to be settled on terms approved by the committee, which were to conduct a majority vote on how certain issues should be resolved. The district court concluded that the committee's recommendation for disclosure to and vote of the members was beyond the committee's statutory authority and ordered the parties to attempt mediation. Both parties appealed. The Supreme Court dismissed the appeal, holding that the court's order for mediation and further recommendation was not a final order under section 25-1902. View "Tegra Corp. v. Boeshart" on Justia Law

AFM ran 52 mattress stores in Indiana and Illinois. Motorists insured AFM with a policy covering loss of Business Income, Extra Expense, and loss due to actions of a Civil Authority. An exclusion applicable to all coverage stated: We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. During the COVID-19 pandemic, the governors of Illinois and Indiana ordered the closure of businesses. AFM was forced to cease business activities at all of its stores. AFM submitted a claim for coverage. Motorists denied it.AFM sought a declaratory judgment in Illinois state court. The judge dismissed the case with prejudice, based on the Virus Exclusion, rejecting a claim of “regulatory estoppel.” AFM claimed that Motorists misrepresented the Virus Exclusion to the Illinois Department of Insurance so that the regulators would approve it. The Seventh Circuit affirmed. Illinois does not recognize regulatory estoppel. The Virus Exclusion unambiguously precludes “civil authority” coverage. View "AFM Mattress Company, LLC v. Motorists Commercial Mutual Insurance Co." on Justia Law

The Delaware Supreme Court addressed whether approval of a corporation’s Class B stockholders was required to transfer pledged assets to secured creditors in connection with what was, in essence, a privately structured foreclosure transaction. Stream TV Network, Inc. (“Stream” or the “Company”), along with Mathu and Raja Rajan, argued that the agreement authorizing the secured creditors to transfer Stream’s pledged assets (the “Omnibus Agreement”) was invalid because Stream’s unambiguous certificate of incorporation (“Charter”) required the approval of Stream’s Class B stockholders. Stream’s Charter required a majority vote of Class B stockholders for any “sale, lease or other disposition of all or substantially all of the assets or intellectual property of the company.” Stream argued the trial court erred by applying a common law insolvency exception to Section 271 in interpreting the Charter, and that the enactment of 8 Del. C. 271 and its predecessor superseded any common law exceptions. It contended that, in any event, such a “board only” common law exception never existed in Delaware. SeeCubic, Inc. argued the court correctly found that neither the Charter, nor Section 271, required approval of the Class B shares to effectuate the Omnibus Agreement. Because the Supreme Court agreed that a majority vote of Class B stockholders was required under Stream’s charter, it vacated the injunction, reversed the declaratory judgment, and remanded for further proceedings. View "Steam TV Networks, Inc. v. SeeCubic, Inc." on Justia Law