Justia Business Law Opinion Summaries

Richard Wade, the former president, CEO, and director of Vertical Computer Systems, Inc., was sued in April 2020 by the company's chief technical officer and several shareholders for breach of fiduciary duty and fraud. Wade's address was initially listed as "3717 Cole Avenue, Apt. 293, Dallas, Texas 75204." After a year, the claims against Wade were severed into a separate action, and the trial court ordered binding arbitration. Wade's attorney later filed a motion to withdraw, listing Wade's address as "3717 Cole Ave., Apt. 277, Dallas, Texas 75204." Notice of the trial was sent to this incorrect address.The trial court scheduled a bench trial for April 19, 2022, and Wade appeared pro se but did not present any evidence. The court ruled in favor of the plaintiffs, awarding them over $21 million. Wade filed a pro se notice of appeal, arguing that he did not receive proper notice of the trial. The Court of Appeals for the Fifth District of Texas affirmed the judgment.The Supreme Court of Texas reviewed the case and found that Wade did not receive proper notice of the trial setting, which violated his due process rights. The court noted that the notice was sent to an incorrect address and that Wade had informed the trial court of this issue. The court held that proceeding to trial without proper notice was reversible error and that Wade was entitled to a new trial. The court reversed the judgment of the Court of Appeals and remanded the case to the trial court for further proceedings. View "Wade v. Vertical Computer Systems, Inc." on Justia Law

Two whistleblowers, John M. Barr and John McPherson, challenged the Securities and Exchange Commission’s (SEC) calculation of their award amounts under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The case involves Life Partners Holdings, Inc., which was found guilty of extensive securities fraud from 1999 to 2013. In 2012, the SEC filed a civil action against Life Partners, resulting in a $38.7 million judgment. Life Partners subsequently filed for Chapter 11 bankruptcy to avoid the appointment of a receiver. The bankruptcy court appointed a Chapter 11 trustee, and a reorganization plan was confirmed in 2016.The SEC posted a Notice of Covered Action in 2015, inviting whistleblowers to apply for awards. Barr and McPherson submitted applications. The SEC’s Claims Review Staff initially recommended denying Barr an award and granting McPherson 23% of the collected sanctions. After objections, the SEC revised its decision, granting Barr 5% and McPherson 20% of the collected amounts. The SEC argued that the bankruptcy proceedings did not qualify as a “covered judicial or administrative action” or a “related action” under the Dodd-Frank Act.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the SEC’s motion to appoint a Chapter 11 trustee did not constitute “bringing an action” under the Dodd-Frank Act. The court found that the ordinary meaning of “action brought” refers to initiating a lawsuit or legal proceedings, which did not apply to the SEC’s involvement in the bankruptcy case. The court also rejected the argument that the SEC’s actions in the bankruptcy case were a continuation of its enforcement strategy. Consequently, the court denied the petitions for review, upholding the SEC’s award calculations. View "Barr v. SEC" on Justia Law

Wack Jills USA, Inc., formerly known as Jack Wills, Inc., assigned all its property and assets to SM Financial Services Corporation in August 2019 as part of an assignment for the benefit of creditors (ABC) proceeding. SM Financial, acting as trustee of the JW ABC Trust, sought court approval for final distributions and to close the case. Home Club Realty Trust, a general unsecured creditor, objected to the motion, citing concerns over the handling of certain assets and compliance with statutory requirements.The Court of Chancery of the State of Delaware reviewed the case. The Assignee failed to comply with several statutory requirements under the Delaware ABC Statute, including not filing an affidavit of inventory within 30 days of the assignment, not seeking the court’s appointment of two appraisers, and not filing annual accountings. The Assignee also unilaterally posted a bond without court approval and retained its affiliated law firm, SM Law, as counsel, which raised concerns about the compensation structure and potential conflicts of interest.The court found that the Assignee’s pervasive non-compliance with the ABC Statute and its conduct in managing the assignment estate constituted sufficient cause for removal. The court denied the motion to approve final distributions and close the case, and removed SM Financial as Assignee pursuant to 10 Del. C. § 7386. The court extended the term of the Trust until further order and prohibited any distributions from the Trust without court approval. The bond remains in place and may be subject to further proceedings. View "In re Wack Jills, Inc." on Justia Law

CSX Transportation, Inc. sued Norfolk Southern Railway Company and Norfolk & Portsmouth Belt Line Railroad Company in 2018, alleging that they conspired to exclude CSX from competing in the international shipping market at the Norfolk International Terminal by imposing an exclusionary switch rate starting in 2010. CSX claimed this rate caused ongoing injury to its business. The key issue was whether the Sherman Act’s four-year statute of limitations barred CSX’s claims or if an exception applied.The United States District Court for the Eastern District of Virginia granted summary judgment to the defendants, finding CSX’s claims time-barred. The court held that the continuing-violation doctrine did not apply because the decision to maintain the switch rate did not constitute a new act causing new injury within the limitations period. The court also found that CSX failed to show specific damages resulting from any acts within the limitations period.The United States Court of Appeals for the Fourth Circuit affirmed the district court’s judgment. The Fourth Circuit agreed that the continuing-violation doctrine did not apply because maintaining the switch rate was not a new act but a continuation of the initial decision. The court also found that CSX did not provide sufficient evidence of new antitrust injury within the limitations period. The court emphasized that for the continuing-violation doctrine to apply, there must be an overt act within the limitations period that causes new injury, which CSX failed to demonstrate. Therefore, the court held that CSX’s claims were time-barred and affirmed the district court’s judgment. View "CSX Transportation, Incorporated v. Norfolk Southern Railway Company" on Justia Law

In 2018, John Burns and Rajeev Arora, representing Moca Financial Inc., engaged in discussions with Manoj Baheti, represented by Yash Venture Holdings, LLC, about a potential investment. The alleged agreement was that Yash would provide $600,000 worth of software development in exchange for a 15% non-dilutable ownership interest in Moca. However, subsequent documents and communications indicated ongoing negotiations and changes in terms, including a reduction of Yash's proposed stake and a shift from software development to a cash investment. Yash eventually refused to sign the final documents, leading to the current litigation.The United States District Court for the Central District of Illinois dismissed most of Yash's claims, including breach of contract, fraud, and securities fraud, but allowed the equitable estoppel and copyright infringement claims to proceed. Yash later voluntarily dismissed the remaining claims, and the district court entered final judgment, prompting Yash to appeal.The United States Court of Appeals for the Seventh Circuit reviewed the case de novo. The court found that Yash did not adequately allege the existence of an enforceable contract, as there was no meeting of the minds on the material term of whether the ownership interest was non-dilutable. Consequently, the breach of contract claim failed. Similarly, the promissory estoppel claim failed due to the lack of an unambiguous promise. The fraud and securities fraud claims were also dismissed because they relied on the existence of a non-dilutable ownership interest, which was not sufficiently alleged. Lastly, the breach of fiduciary duty claims failed as there was no enforceable stock subscription agreement to establish a fiduciary duty. The Seventh Circuit affirmed the district court's judgment. View "Yash Venture Holdings, LLC v. Moca Financial, Inc." on Justia Law

Ronald Goldschmidt appealed the dismissal of his prohibition claim against Judge Alan Triggs and Magistrate Thomas Beridon of the Hamilton County Court of Common Pleas. Goldschmidt argued that Magistrate Beridon exceeded his authority by issuing a magistrate’s order instead of a magistrate’s decision regarding a charging order. This charging order was related to a civil action where Goldschmidt was found liable for over $1.5 million, and Elm Investment sought to collect on this judgment through Goldschmidt’s membership interests in several limited-liability companies.The First District Court of Appeals dismissed Goldschmidt’s claim, holding that the trial court had jurisdiction to issue the charging order and that any error in how it was issued was a matter of the exercise of jurisdiction, not a lack of it. The court also found that Goldschmidt had an adequate remedy in the ordinary course of law by filing a motion to set aside the magistrate’s order.The Supreme Court of Ohio reviewed the case de novo and affirmed the First District’s judgment. The court held that the issuance of the charging order as a magistrate’s order did not exceed the trial court’s subject-matter jurisdiction. It noted that procedural errors by a magistrate do not affect the trial court’s jurisdiction and render decisions voidable, not void. The court concluded that Goldschmidt had an adequate remedy in the ordinary course of law through a motion to set aside the magistrate’s order and an appeal from any subsequent ruling on such a motion. Therefore, the court affirmed the dismissal of Goldschmidt’s complaint for a writ of prohibition. View "State ex rel. Goldschmidt v. Triggs" on Justia Law

Tesla, Inc. and its affiliates challenged a Louisiana law that prohibits automobile manufacturers from selling directly to consumers and performing warranty services for cars they do not own. Tesla alleged that the law violated federal antitrust law, due process rights, and equal protection rights. The defendants included the Louisiana Motor Vehicle Commission, its commissioners, the Louisiana Automobile Dealers Association (LADA), and various dealerships.The United States District Court for the Eastern District of Louisiana dismissed Tesla's claims. The court found that the private defendants were immune from antitrust liability, Tesla had not plausibly pleaded a Sherman Act violation against the governmental defendants, there was insufficient probability of actual bias to support the due process claim, and the regulations passed rational-basis review for the equal protection claim.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court reversed the dismissal of Tesla's due process claim, finding that Tesla had plausibly alleged that the Commission's composition and actions created a possible bias against Tesla, violating due process. The court vacated and remanded the dismissal of the antitrust claim, noting that the due process ruling fundamentally altered the grounds for Tesla's alleged antitrust injury. The court affirmed the dismissal of the equal protection claim, holding that the regulations had a rational basis in preventing vertical integration and controlling the automobile retail market.In summary, the Fifth Circuit reversed the due process claim dismissal, vacated and remanded the antitrust claim dismissal, and affirmed the equal protection claim dismissal. The case was remanded for further proceedings consistent with the court's opinion. View "Tesla v. Louisiana Automobile Dealers" on Justia Law

In 2019, Ancor Holdings, L.P. (Ancor) and Landon Capital Partners, L.L.C. (Landon) entered into letters of intent to invest in and acquire a majority interest in ICON EV, L.L.C. (ICON). The deal fell through, and Landon and ICON entered into their own agreement. Ancor sued Landon and ICON for breach of contract and tortious interference, respectively. The trial court dismissed Ancor’s tortious interference claim against ICON as a matter of law and denied Ancor’s declaratory judgment claim. The jury found for Ancor on the breach of contract claim against Landon, awarding $2,112,542 in damages.The United States District Court for the Northern District of Texas initially handled the case. The trial court dismissed Ancor’s tortious interference claim against ICON and denied Ancor’s declaratory judgment claim. The jury found Landon breached the contract and awarded Ancor damages. Ancor appealed the dismissal of its claims, and Landon cross-appealed the jury’s verdict.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court reversed the trial court’s dismissal of Ancor’s declaratory judgment and tortious interference claims, remanding them for a jury trial. The appellate court affirmed the jury’s finding that Landon breached the contract but reversed the trial court’s judgment on the reimbursement amount, instructing it to determine 80% of all third-party costs incurred. The court held that Ancor was entitled to a jury trial on its declaratory judgment claim and that sufficient evidence supported the tortious interference claim against ICON. The court also found that the trial court did not err in submitting the breach of contract claim to the jury, nor did the jury err in its findings. View "Ancor Holdings, L.P. v. Landon Capital Partners, L.L.C." on Justia Law

The case involves EPD Investment Co., LLC (EPD) and its owner, Jerrold S. Pressman, who were found to have operated a Ponzi scheme. EPD was forced into Chapter 7 bankruptcy by its creditors, and the Trustee, Jason M. Rund, filed an adversary proceeding against Poshow Ann Kirkland and her husband, John Kirkland, seeking to avoid fraudulent transfers made by EPD to John. John had assigned his interest in EPD to the Bright Conscience Trust, for which Ann is the trustee.The United States District Court for the Central District of California bifurcated the trial, separating the claims against John and Ann. A jury trial was conducted for the claims against John, resulting in a verdict that EPD was a Ponzi scheme but that John received payments in good faith and for reasonably equivalent value. The bankruptcy court ruled that the jury's findings would be binding in the Trustee's claims against Ann. Ann appealed the judgment, particularly challenging the jury's finding that EPD was a Ponzi scheme.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court held that Ann had standing to appeal due to her significant involvement in the case and her interest in the issues presented. The court rejected Ann's argument that the district court erred by not including a mens rea instruction requiring the jury to find that Pressman knew he was operating a Ponzi scheme that would eventually collapse. The court held that fraudulent intent could be inferred from the existence of a Ponzi scheme established through objective criteria. The court also rejected Ann's argument that the district court erred by instructing the jury that lenders are investors for purposes of a Ponzi scheme.The Ninth Circuit affirmed the district court's order affirming the judgment of the bankruptcy court and remanded the case for further proceedings. View "In re: EPD INVESTMENT COMPANY V. KIRKLAND" on Justia Law

United Parcel Service, Inc. (UPS) challenged the Postal Regulatory Commission's (Commission) handling of the United States Postal Service's (Postal Service) pricing of competitive products, arguing that the Postal Service underprices these products by not accounting for "peak-season" costs incurred during the holiday season. UPS claimed that these costs, driven by increased demand for package deliveries, should be attributed to competitive products rather than being treated as institutional costs.The Commission denied UPS's petition to initiate rulemaking proceedings and its subsequent motion for reconsideration. The Commission found that UPS's methodology for calculating peak-season costs was flawed and did not produce reliable estimates. It also concluded that the existing cost-attribution framework already accounted for the costs caused by competitive products during the peak season. The Commission explained that the Postal Service's costing models, which use an incremental-cost approach, appropriately attribute costs to competitive products and that the remaining costs are correctly treated as institutional costs.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. The court upheld the Commission's decision, finding that the Commission's rejection of UPS's methodology was reasonable and well-explained. The court noted that the Commission had addressed UPS's concerns about the Postal Service's costing models and had initiated further proceedings to explore potential updates to the models. The court also rejected UPS's argument that the Commission failed to consider whether peak-season costs are institutional costs uniquely associated with competitive products, noting that this issue was not properly presented in this case.The court denied UPS's petition for review, affirming the Commission's orders. View "United Parcel Service, Inc. v. PRC" on Justia Law