Justia Business Law Opinion Summaries

In 2008, Kelly James Schnorenberg formed KJS Marketing, Inc. to secure funding and recruit agents for insurance companies. Between 2009 and 2015, KJS solicited over $15 million from approximately 250 investors, promising a 12% annual return. Schnorenberg failed to disclose to investors his past legal and financial troubles, including a lawsuit by the Colorado Division of Securities, a permanent injunction from selling securities in Colorado, a bankruptcy filing, and unpaid civil judgments.Schnorenberg was charged with twenty-five counts of securities fraud under section 11-51-501, with twenty-four counts based on materially false statements or omissions and one count based on a fraudulent course of business. He planned to defend himself by arguing that he acted in good faith reliance on the advice of his securities lawyer, Hank Schlueter. However, the trial court denied his motions for a continuance to secure Schlueter's testimony and excluded Schnorenberg's testimony about the specific advice he received, ruling it as hearsay.The Colorado Court of Appeals vacated seven of Schnorenberg's convictions as time-barred, reversed the remaining convictions, and remanded the case for further proceedings. The court concluded that the trial court erred in excluding Schnorenberg's testimony about his lawyer's advice and in not instructing the jury that good faith reliance on the advice of counsel could negate the mens rea element of the securities fraud charges.The Supreme Court of Colorado reviewed the case and held that the mens rea of "willfully," synonymous with "knowingly," applies to each element of securities fraud under subsections 11-51-501(1)(b) and (c). The court concluded that Schnorenberg's testimony about his lawyer's advice was relevant to whether he had the requisite mens rea and that the trial court erred in excluding this testimony. The court affirmed the judgment of the Court of Appeals and remanded the case for a new trial. View "People v. Schnorenberg" on Justia Law

The case involves a group of in-state and out-of-state precious metal traders and their representatives (the "Bullion Traders") challenging Minnesota Statutes Chapter 80G, which regulates bullion transactions. The Bullion Traders argued that the statute violated the dormant Commerce Clause due to its extraterritorial reach, as defined by the term "Minnesota transaction."The United States District Court for the District of Minnesota initially found that Chapter 80G violated the dormant Commerce Clause. The case was then remanded by the United States Court of Appeals for the Eighth Circuit for a severability analysis. The district court concluded that striking portions of the "Minnesota transaction" definition cured the extraterritoriality concern and complied with Minnesota severability law.The Bullion Traders appealed, arguing that the severed statute still applied extraterritorially and that the district court erred in applying Minnesota severability law. The United States Court of Appeals for the Eighth Circuit reviewed the case de novo and affirmed the district court's decision. The appellate court found that the severed definition of "Minnesota transaction" no longer regulated wholly out-of-state commerce and that the statute, as severed, was complete and capable of being executed in accordance with legislative intent.The Eighth Circuit held that the district court correctly severed the extraterritorial provisions from Chapter 80G, and the remaining statute did not violate the dormant Commerce Clause. The court also agreed that the severed statute complied with Minnesota severability law, as the valid provisions were not essentially and inseparably connected with the void provisions, and the remaining statute was complete and executable. The judgment of the district court was affirmed. View "Styczinski v. Arnold" on Justia Law

Crabar/GBF, Inc. (Crabar) sued Mark Wright, Wright Printing Co. (WPCO), Mardra Sikora, Jamie Frederickson, and Alexandra Kohlhaas for trade secret violations and related claims. Crabar alleged that after purchasing WPCO's folder business, WPCO retained and used confidential information, including customer lists and sales data, to launch a competing folder business. Crabar also claimed that former employees Kohlhaas and Frederickson took and used Crabar's confidential information to aid WPCO's new business.The United States District Court for the District of Nebraska held an eleven-day trial, where the jury found all defendants liable on each count, awarding Crabar over five million dollars in compensatory and exemplary damages. Post-trial motions led to a final amended judgment of roughly four million dollars against the defendants. Defendants appealed, challenging several of the district court’s rulings.The United States Court of Appeals for the Eighth Circuit reviewed the case. The court affirmed the district court's decisions, including the denial of WPCO's motion for judgment as a matter of law regarding a contractual damages limitation, finding WPCO waived the argument by not raising it in the final pretrial order. The court also upheld the enforceability of confidentiality agreements signed by Frederickson and Kohlhaas, and found sufficient evidence to support the jury's findings on trade secret misappropriation, tortious interference, and causation of damages.The Eighth Circuit also ruled that the district court did not abuse its discretion in admitting expert testimony on damages, as the expert's assumptions were not fundamentally unsupported. The court found no error in the jury's award calculations, rejecting the argument of double recovery and affirming the sufficiency of evidence linking defendants' actions to Crabar's damages. The court concluded that the jury's awards were not excessive or the result of passion or prejudice. The judgment of the district court was affirmed. View "Crabar/GBF, Inc. v. Wright" on Justia Law

A plaintiff filed a putative class action against a dietary supplement company, alleging that the supplement Hydro BCAA was mislabeled. The plaintiff claimed that preliminary testing showed the supplement contained more carbohydrates and calories than listed on its FDA-prescribed label. The plaintiff tested the supplement using FDA methods but did not follow the FDA’s twelve-sample sampling process.The United States District Court for the Southern District of California dismissed the complaint, holding that the Food, Drug, and Cosmetic Act preempted the claims because the plaintiff did not plead that he tested the supplement according to the FDA’s sampling process. The district court noted a divide among district courts on whether plaintiffs must plead compliance with the FDA’s testing methods and sampling processes to avoid preemption.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court held that the plaintiff’s complaint allowed a reasonable inference that the supplement was misbranded under the Act, even without allegations of compliance with the FDA’s sampling process. The court found that the plaintiff’s preliminary testing of one sample, which showed significant discrepancies in carbohydrate and calorie content, was sufficient to survive a motion to dismiss. The court emphasized that plaintiffs are not required to perform the FDA’s sampling process at the pleading stage to avoid preemption.The Ninth Circuit reversed the district court’s dismissal, allowing the plaintiff’s state-law claims to proceed. The court concluded that the plaintiff’s allegations were sufficient to avoid preemption and stated a plausible claim that the supplement was mislabeled under the Act. View "SCHEIBE V. PROSUPPS USA, LLC" on Justia Law

CoStar Group, Inc. and CoStar Realty Information, Inc. (collectively, “CoStar”) and Commercial Real Estate Exchange, Inc. (“CREXi”) are online platforms competing in the commercial real estate listing, information, and auction markets. CoStar sued CREXi for copyright infringement, alleging that CREXi listed images and information hosted by CoStar without permission. CREXi counterclaimed on antitrust grounds, asserting that CoStar engaged in monopolistic practices to exclude competition.The United States District Court for the Central District of California dismissed CREXi’s antitrust counterclaims and directed entry of final judgment on those claims under Fed. R. Civ. P. 54(b). The district court held that CREXi failed to show CoStar had monopoly power and that the agreements at issue were not exclusive. CREXi appealed the dismissal of its antitrust counterclaims.The United States Court of Appeals for the Ninth Circuit reviewed the case and reversed the district court’s dismissal of the antitrust counterclaims. The Ninth Circuit held that CREXi successfully stated claims under §§ 1 and 2 of the Sherman Act, California’s Cartwright Act, and the Unfair Competition Law. The court found that CREXi plausibly alleged CoStar had monopoly power in the relevant markets and engaged in anticompetitive conduct by entering into de facto exclusive deals with brokers and imposing technological barriers to entry. The court concluded that a monopolist using its power to exclude competitors and maintain monopoly power violates § 2 of the Sherman Act, and using exclusive deals to do so violates § 1 of the Sherman Act and the Cartwright Act. The court also held that CREXi stated claims under the “unfair” and “unlawful” prongs of the Unfair Competition Law. The Ninth Circuit affirmed the district court’s dismissal of CREXi’s tortious interference claims as they were improperly raised. The case was remanded for further proceedings. View "COSTAR GROUP, INC. V. COMMERCIAL REAL ESTATE EXCHANGE, INC." on Justia Law

Donald Norman, Patrick Strateman, and Amir Taaki established Intersango, a cryptocurrency exchange. After Intersango ceased operations, Norman filed a derivative complaint on behalf of Intersango against Patrick and Jamie Strateman and Taaki, alleging various claims including breach of fiduciary duty and conversion. The parties later entered into a settlement agreement, but over a year later, Norman sought to set aside the settlement, while the Stratemans moved to enforce it. The trial court granted the motion to enforce the settlement and denied Norman's motion to set it aside, leading to the dismissal of the claims.The trial court, presided over by Judge Rochelle East, found that the settlement agreement was enforceable and dismissed the claims and cross-claims with prejudice. Norman appealed, arguing that the settlement required judicial approval because it involved derivative claims, and that the trial court erred in enforcing the settlement without such approval.The California Court of Appeal, First Appellate District, Division Three, reviewed the case. The court agreed with Norman, holding that the settlement of derivative claims requires judicial approval to ensure it is fair and reasonable and not the product of fraud or collusion. The court found that neither Judge Kahn, who mediated the settlement, nor Judge East, who ruled on the motions, conducted the necessary judicial review and approval of the settlement. Consequently, the appellate court vacated the trial court's order enforcing the settlement and remanded the case for the trial court to conduct the required judicial review of the settlement. View "Norman v. Strateman" on Justia Law

Junius Joyner, III, an African-American male, was hired by a legal staffing agency, Mestel & Company (Hire Counsel), and assigned to work at Morrison & Foerster LLP in Washington, D.C. He worked on the merger of Sprint Corporation with T-Mobile U.S., Inc. from July to December 2019. Joyner alleged several incidents of racial discrimination and a hostile work environment, including delayed work assignments, derogatory comments, and harassment by coworkers. He also claimed wrongful discharge under D.C. law, asserting he was terminated after reporting potential antitrust violations.The United States District Court for the District of Columbia dismissed Joyner’s complaint for failure to state a claim. The court found that Joyner did not provide sufficient facts to support his claims of racial discrimination and a hostile work environment under 42 U.S.C. § 1981 and Title VII. The court also dismissed his wrongful discharge claim under D.C. law, concluding that it lacked supplemental jurisdiction over this state law claim.The United States Court of Appeals for the District of Columbia Circuit reviewed the case de novo. The court affirmed the district court’s dismissal of Joyner’s federal claims, agreeing that Joyner failed to plausibly allege that his treatment was racially motivated or that the work environment was sufficiently hostile. The court found that Joyner’s allegations did not meet the necessary standard to infer racial discrimination or a hostile work environment. However, the appellate court vacated the district court’s judgment on the wrongful discharge claim, holding that the district court lacked jurisdiction over this claim and remanded it with instructions to dismiss for lack of jurisdiction. View "Joyner v. Morrison and Foerster LLP" on Justia Law

The case involves The Boeing Company and the Southwest Airlines Pilots Association (SWAPA). Boeing introduced the 737 MAX in 2011, which was marketed as more fuel-efficient and similar to previous models, requiring no additional pilot training. However, two crashes in 2018 and 2019 led to the grounding of the MAX. SWAPA, representing Southwest pilots, had agreed to fly the MAX but later sued Boeing, claiming Boeing interfered with their business relationship with Southwest and fraudulently induced them to fly the MAX without proper training.The trial court dismissed SWAPA's claims with prejudice, agreeing with Boeing that the Railway Labor Act preempted the claims and that SWAPA lacked standing. SWAPA appealed, and the Court of Appeals for the Fifth District of Texas held that the Act did not preempt the claims, SWAPA lacked associational standing, but had standing to assert claims on its own behalf. The court also ruled that the assignments of claims from individual pilots to SWAPA were valid but did not retroactively grant standing in the original suit, leading to a partial dismissal without prejudice.The Supreme Court of Texas reviewed the case and concluded that the Railway Labor Act does not preempt SWAPA’s claims because their resolution does not require interpretation of the collective bargaining agreements (CBAs). The court also held that the assignments of claims from pilots to SWAPA are not void against public policy, allowing SWAPA to pursue these claims as an assignee. The court affirmed the appellate court’s judgment, remanding the case to the trial court for further proceedings on the claims SWAPA asserts on its own behalf. View "The Boeing Company v. Southwest Airlines Pilots Association" on Justia Law

The case involves a dispute where Pranay Bajjuri and others (appellees) sued Anand Karney, Sudha Karney (appellants), and others for unjust enrichment, fraud, and civil conspiracy. The appellees alleged that the appellants fraudulently induced them to invest in various limited liability companies (LLCs) for purchasing and operating rental properties, but the appellants diverted the investments for personal gain. The appellants failed to produce financial and organizational documents related to the LLCs during discovery, leading to the current appeal.The District Court for Douglas County issued a scheduling order for discovery and trial. Despite repeated requests and a court order to compel, the appellants did not produce the required documents. The appellees filed a motion for sanctions, seeking default judgment and attorney fees. The district court found that the appellants had repeatedly violated discovery rules and had been previously warned of sanctions. The court granted the motion for sanctions, entering a default judgment of $2,201,385.82 and awarding attorney fees of $180,645.68 against the appellants.The Nebraska Supreme Court reviewed the case and upheld the district court's decision. The court found that the appellants had frustrated the discovery process and failed to comply with the court's order to compel. The court determined that the appellants, as members and managers of the LLCs, had the ability to obtain and produce the required documents but did not do so. The court concluded that the sanctions of default judgment and attorney fees were appropriate given the appellants' inexcusable recalcitrance and history of discovery abuse. The Nebraska Supreme Court affirmed the district court's orders, finding no abuse of discretion. View "Bajjuri v. Karney" on Justia Law

A Canadian energy company acquired a Delaware corporation in a merger, resulting in significant change-in-control payments to three of the acquired corporation’s executives. Two of these executives negotiated the transaction. Stockholders of the acquired corporation sued, alleging breaches of fiduciary duties by the executives and the board of directors, claiming the merger was timed to benefit the executives at the expense of stockholders. They also alleged that the acquiror aided and abetted these breaches and that the executives issued a misleading proxy statement.The Court of Chancery found that the plaintiffs proved their aiding-and-abetting claims, determining that the acquiror had constructive knowledge of and participated in the breaches. The court assessed damages, entering a judgment of approximately $200 million against the acquiror.The Supreme Court of Delaware reviewed the case. It reversed the Court of Chancery’s judgment, holding that for an acquiror to be liable for aiding and abetting a sell-side breach of fiduciary duty, the acquiror must have actual knowledge of both the target’s breach and the wrongfulness of its own conduct. The court found that the standard of actual knowledge was not met in this case. The court also concluded that the acquiror’s actions did not constitute substantial assistance in the fiduciary breaches, as required for aiding-and-abetting liability. Consequently, the Supreme Court of Delaware reversed the Court of Chancery’s judgment. View "In re Columbia Pipeline Group, Inc. Merger Litigation" on Justia Law