Justia Business Law Opinion Summaries

The Supreme Court affirmed in part and reversed in part the judgment of the district court in this complaint against the Trustees of the Beckton Ranch Trust (BRT) seeking declaratory judgment, damages for breach of fiduciary duty, and an accounting, holding that the district court erred in part.In 2018, Waldo Forbes gifted his shares in the BRT to two of his stepsons. The Trustees exercised an option within the trust instrument to reacquire the gifted shares at "fair value." After the beneficiaries purchased their shares Forbes brought this complaint. The district court found that Forbes did not have standing to seek declaratory relief and that the Trustees did not breach their duty of loyalty and had rendered an inadequate accounting. Thereafter, the Trustees filed a new accounting, which the district court found to be sufficient. The Supreme Court reversed in part, holding (1) Forbes lacked standing to seek declaratory judgment; (2) with one exception, the Trustees did not breach their duty of loyalty by using a sealed bidding process to appraise the "fair value" of the shares; (3) one Trustee breached her duty of loyalty through impermissible self-dealing; and (4) the annual accounting contained clear, complete, and accurate information as required under common law. View "Forbes v. Forbes" on Justia Law

Sunless sells tanning booths and spray tan solution under the “Mystic Tan” mark. Sunless claims that applying Mystic Tan solution in a Mystic Tan booth results in a “Mystic Tan Experience.” Palm Beach owns and franchises tanning salons. It owns several Mystic Tan-branded booths, and previously bought Mystic Tan-branded tanning solution to use in them; the booths were designed to accept only Mystic Tan solution. Palm Beach jury-rigged the booths so that they will operate with its own distinctly branded spray tan solution, unapproved by Sunless.Sunless sought a preliminary injunction under the Lanham Act, 15 U.S.C. 1114, 1125, arguing that the jury-rigging is likely to confuse consumers into believing they are getting a genuine “Mystic Tan Experience” when they are not. The district court denied the motion, finding that Sunless had failed to show, at this stage of the litigation, that Palm Beach’s salon customers would be confused. The Sixth Circuit affirmed. Palm Beach never conceded that it sells a “Mystic Tan Experience” as an indivisible whole. Palm Beach argued there are two products: booths and solutions, each displaying its own distinct mark. Palm Beach continues to use the Mystic Tan-branded booths (which it owns outright), but neither uses nor claims to use Mystic Tan solutions. View "Sunless, Inc. v. Palm Beach Tan, Inc." on Justia Law

Movant, IJK Palm LLC filed a motion in the district court seeking discovery under 28 U.S.C. Section 1782 from several companies and individuals for use in a suit it intended to file in the Cayman Islands. After IJK filed its request under Section 1782, the company on behalf of which IJK intended to sue, entered liquidation proceedings.   In the Cayman Islands, only a company’s official liquidator may ordinarily sue on the company’s behalf. IJK proposes three avenues through which it might nevertheless use the material it requests. The district court granted IJK’s discovery request. The Second Circuit reversed the district court’s ruling granting Movant’s discovery request. The court held that Movant has not established that it is an “interested person” with respect to its first proposed suit and that it has not established that the material it requests is “for use” in any of its proposed suits within the meaning of Section 1782. View "IJK Palm LLC v. Anholt Services USA, Inc. et al." on Justia Law

In a consolidated appeal each of the insured businesses, SA Palm Beach, LLC, Emerald Coast Restaurants, Inc., Rococo Steak, LLC, and R.T.G. Furniture, Corporation, were denied after seeking coverage under an all-risk insurance policy that provides compensation for losses and expenses incurred in connection with “direct physical loss of or damage to” the covered property or “direct physical loss or damage to” the covered property. The Eleventh Circuit addressed the question of whether under Florida law, all-risk commercial insurance policies provide coverage for “direct physical loss of or damage to” property or “direct physical loss or damage to” property insure against losses and expenses incurred by businesses as a result of COVID-19. The court affirmed in part and vacated in part, the district court’s dismissal of the complaints. The court held that under Florida law there is no coverage because COVID-19 did not cause a tangible alteration of the insured property. The court reasoned that under Florida law, an insurance policy should be read “as a whole, endeavoring to give every provision its full meaning and operative effect.” Further, Florida Supreme Court has explained, that an “all-risk policy” does not extend coverage to “every conceivable loss.” Thus, the court found that it believes that the Florida Supreme Court would hold that, under the allegations in the complaints before the court, there is no coverage. The court vacated in part the dismissal of Emerald Coast’s complaint finding that the district court did not address the Plaintiff’s Spoilage provision claim. View "SA Palm Beach, LLC v. Certain Underwriters at Lloyd's London, et al." on Justia Law

A judgment creditor seeking to seize funds in bank accounts held by the judgment debtor’s spouse served a notice of levy on the bank’s agent for service of process. The agent misread the form and rejected it. The agent informed the bank of its mistake and the bank then froze the funds, however, the spouse had all but drained the accounts. Plaintiff filed a motion for a court order imposing third-party liability on Defendant for its noncompliance with the notice of levy, which the trial court denied.   The Second Appellate District reversed the trial court’s ruling in the bank’s favor and held that the bank is liable for its agent’s negligence in misreading the service of process form. The court further held that the bank is liable for some of the funds withdrawn. The court reasoned that a third person’s “fail[ure] or refus[al]” to deliver property subject to a levy “without good cause” renders the third person “liable to the judgment creditor” for the amounts withdrawn and covered by the levy. Further, the principal’s failure to deliver property subject to a levy is excused when an agent’s mistake constitutes “good cause.” Here, because the agent, in this case, was negligent in misreading the standardized form it was served with, the agent for service of process—and hence its principal, the bank—had reason to know of the levy, such that the bank is liable to the judgment creditor for some of the withdrawn funds. View "Bergstrom v. Zions Bancorporation" on Justia Law

EBO filed suit after unsuccessfully seeking to lease a space in a building owned by the Taylor LLC, including derivative claims brought by EBO on behalf of Taylor, alleging that the denial of the lease caused Taylor to suffer economic injury. The defendants argued that EBO lacked standing under Corporations Code section 17709.02 to pursue them because during the litigation it relinquished its interest in and was no longer a member of the Taylor LLC. The court determined that it nonetheless had statutory discretion to allow EBO to maintain the derivative claims.The court of appeal vacated. Section 17709.02 requires a party to maintain continuous membership in a limited liability company to represent it derivatively, just as section 800 requires a party to maintain continuous ownership in a corporation to represent it derivatively. The statutory discretion conferred on trial courts under section 17709.02(a)(1), to permit “[a]ny member [of an LLC] who does not meet these requirements” to maintain a derivative suit does not permit courts to excuse a former member from the continuous membership requirement. While equitable considerations may warrant exceptions to the continuous membership requirement, no such considerations were presented here. View "Sirott v. Superior Court of Contra Costa County" on Justia Law

The Court of Chancery entered a final judgment awarding Plaintiffs relief in this business dispute, holding that Plaintiffs proved that James Harron breached a duty of loyalty he owed to certain companies.Harron and the brothers Blair and Matthew Nagel formed Metro Storage International, LLC, and Harron served as the president. During his tenure, Harron provided consulting services to another client and assisted that client by disclosing confidential information belonging to Metro International and its affiliates. Later, the Nagel brothers backed Harron's new venture by forming Metro Storage LATAM LLC (together with Metro International, the Companies). Harron subsequently left the Companies, taking confidential documents belonging to the Companies. Thereafter, the Nagel brothers caused the Companies and their affiliates to file this action against Harron. The Court of Chancery granted judgment in favor of Plaintiffs, holding that Plaintiffs proved that Harron breached confidentiality restrictions in the Companies' governing agreements and violated the Stored communications Act. View "Metro Storage International LLC v. Harron" on Justia Law

In March 2020, to prevent the spread of Covid-19, Illinois Governor Pritzker ordered all persons living in the state to stay at home except to perform specified “essential activities” and ordered “non-essential” businesses to cease all but minimum basic operations. Childcare providers were permitted to continue operating only with an emergency license to care for the children of essential workers. Michigan’s Governor Whitmer issued a similar order. Both states lifted those restrictions by June 2020. West Bend denied claims by childcare centers under their all-risk commercial property insurance policies.The policies cover the actual loss of income and expense due to the suspension of an insured’s operations “caused by direct physical loss of or damage to property”. The loss or damage must be caused by “[d]irect physical loss.” Lost income and extra expenses are covered when a civil authority prohibits access to insured premises because of damage at nearby property. The policies cover income lost and expenses incurred when an insured’s operations are temporarily suspended by government order "due to an outbreak of a ‘communicable disease’ … at the insured premises.”The district court concluded that the Centers had not plausibly alleged that COVID-19 caused physical loss of or damage to their property—or to nearby property— or that government shutdown orders were due to an outbreak at their premises. The Seventh Circuit affirmed, noting that other circuits have reached the same conclusion. View "Paradigm Care & Enrichment Center, L.L.C. v. West Bend Mutual Insurance Co." on Justia Law

The United States District Court for the Western District of Oklahoma certified two questions of law to the Oklahoma Supreme Court relating to the Oklahoma Consumer Protection Act, and whether it applied to conduct outside of Oklahoma. The matter concenred a dispute between Continental Resources, Inc. (Continental), an oil and gas producer headquartered in Oklahoma, and Wolla Oilfield Services, LLC (Wolla), a North Dakota limited liability company that operated as a hot oil service provider in North Dakota. Continental alleged the parties entered into an agreement for Wolla to provide hot oil services at an hourly rate to Continental's wells in North Dakota. As part of the contract, Wolla agreed to submit its invoices through an "online billing system" and to bill accurately and comprehensively for work it performed. A whistleblower in Wolla's accounting department notified Continental about systematic overbilling in connection with this arrangement. Continental conducted an audit and concluded Wolla's employees were overbilling it for time worked. Wolla denies these allegations. The Oklahoma Supreme Court concluded: (1) the Oklahoma Consumer Protection Act does not apply to a consumer transaction when the offending conduct that triggers the Act occurs solely within the physical boundaries of another state; and (2) the Act also does not apply to conduct where, even if the physical location is difficult to pinpoint, such actions or transactions have a material impact on, or material nexus to, a consumer in the state of Oklahoma. View "Continental Resources v. Wolla Oilfield Services" on Justia Law

The Court of Chancery found for Plaintiff on all counts and counterclaim counts in this case involving affordable rental housing property held by a limited partnership, holding that the new limited partner lacked caused to remove the general partner.At issue was affordable housing projects in a federal program that were held by a Delaware limited partnership. Plaintiffs were the partnership and general partner and Defendant was a new limited partner. Defendant sought either a sale of the property or a buyout of its partnership interests, and when the general partner refused to cooperate, the limited partner attempted to remove the general partner for cause. The general partner sought a declaratory judgment that its removal was invalid, and the limited partner asserted counterclaims for, inter alia, breach of contract. The Court of Chancery found in favor of Plaintiffs on all counts, holding (1) the limited partner failed to prove that the general partner breached its modified judiciary duties or the limited partnership agreement; and (2) therefore, the limited partner lacked cause to remove the general partner. View "JER Hudson GP XXI LLC v. DLE Investors, LP" on Justia Law