Justia Business Law Opinion Summaries

The case involves a dispute over the control of a nonprofit corporation, which was dissolved by the State due to the executive director’s failure to pay taxes and fees and renew corporate registration. Despite the dissolution, the directors and members continued the corporation’s activities, unaware of the loss of corporate status. When the issue was discovered, some individuals filed paperwork to incorporate a new entity with the same name, offices, and bank account. A national affiliate proposed elections to resolve the leadership, but the new incorporators denied affiliation with the old corporation. Elections were held, and new directors were chosen, leading to litigation over who had authority to act on behalf of the new corporation.The Superior Court of Alaska, Third Judicial District, Anchorage, ruled that the new corporation was essentially the same entity as the old one, with the same members. The court concluded that the disputed election was valid and that the newly elected individuals had authority to act on behalf of the corporation. The court ousted the individuals who had filed the incorporation paperwork and awarded attorney’s fees to the prevailing parties but exempted individual litigants from liability for these fees.The Alaska Supreme Court largely affirmed the Superior Court’s rulings but vacated and remanded the dismissal of one third-party claim for a more detailed explanation. The court also vacated and remanded the Superior Court’s decision to excuse individual litigants from liability for attorney’s fees, finding the reason for this ruling invalid. The main holding was that the new corporation was the same entity as the old one, and the election of new directors was valid, giving them authority to act on behalf of the corporation. View "Aiken v. Alaska Addiction Professionals Association" on Justia Law

The case involves a failed business relationship between Mike Jones, Jeremy Sligar, and Sligar's business, Overtime Garage, LLC. Jones claimed they formed a joint venture in 2011 to buy and sell used vehicles, which Sligar disputed. The relationship deteriorated, and Sligar terminated the venture in 2016. Jones filed a complaint in 2016 seeking a declaratory judgment, dissolution of the joint venture, and other relief. Sligar counterclaimed for similar relief. During the litigation, Safaris Unlimited, LLC, bought Jones's interest in the case at a sheriff's sale and settled the case by dismissing Jones's claims against Sligar.The District Court of the Fifth Judicial District, Twin Falls County, denied Jones's motion to set aside the judgment in the first case (Sligar I) and granted summary judgment to Sligar in the second case (Sligar II), finding that Jones's claims were barred by res judicata. The court also awarded attorney fees to Sligar and Safaris, finding Jones's motion to set aside the judgment was frivolous and untimely. Jones appealed these decisions, arguing the consolidation of small claims actions with Sligar I was improper and that his Rule 60(b) motion was timely.The Supreme Court of Idaho affirmed the district court's decisions. It held that the consolidation of the small claims actions with Sligar I was proper, as the small claims were related to the disputed property in Sligar I. The court also found that Jones did not file his Rule 60(b) motion within a reasonable time, as he delayed over five months without a valid reason. Additionally, the court upheld the summary judgment in Sligar II, agreeing that Jones's claims were barred by res judicata. The court awarded attorney fees to Sligar for the appeal in Sligar I but not in Sligar II, as Sligar did not prevail on its cross-appeal. View "Jones v. Sligar" on Justia Law

Yorktown Systems Group Inc. and Threat Tec LLC, both defense contractors, entered into a mentor-protégé relationship under the Small Business Administration’s program to jointly pursue government contracts. They formed a joint venture (JV) and were awarded a $165 million contract with the U.S. Army. The JV agreement allocated specific work shares to each company. However, the relationship soured, and Threat Tec attempted to terminate Yorktown’s subcontract, effectively cutting Yorktown out of its share of the contract.The United States District Court for the Northern District of Alabama granted Yorktown a preliminary injunction, preventing Threat Tec from terminating the subcontract and depriving Yorktown of its rights under the JV agreement. The court found that Yorktown had shown a substantial likelihood of success on its breach of contract and breach of fiduciary duty claims and faced irreparable harm. The court noted that Threat Tec’s CEO had made false statements and lacked candor, leading to the belief that Threat Tec’s motives were unethical.The United States Court of Appeals for the Eleventh Circuit reviewed the case and affirmed the district court’s decision. The appellate court found no clear error in the district court’s factfindings and concluded that the district court acted within its discretion. The court held that Threat Tec, as the managing member of the JV, owed fiduciary duties of loyalty and care to Yorktown and likely breached those duties by attempting to cut Yorktown out of its contractually specified workshare. The court also agreed that Yorktown faced irreparable harm, including potential damage to its business reputation and the loss of highly skilled employees, which could not be remedied by monetary damages alone. View "Yorktown Systems Group Inc. v. Threat TEC LLC" on Justia Law

In 2006, David and Jill Landrum, along with Michael and Marna Sharpe, purchased land in Madison County to develop a mixed-use project called the Town of Livingston. The project stalled due to the 2008 financial crisis and legal issues. In 2010, Jill and Marna formed Livingston Holdings, LLC, which owned the development properties. Marna contributed more financially than Jill, leading to a disparity in ownership interests. In 2014, Marna sold her interest to B&S Mississippi Holdings, LLC, managed by Michael Bollenbacher. Jill stopped making her required monthly contributions in December 2018.The Madison County Chancery Court disqualified Jill as a derivative plaintiff, realigned Livingston Holdings as a defendant, and dismissed several claims. The court found that Jill did not fairly and adequately represent the interests of the company due to personal interests and economic antagonisms. The court also granted summary judgment in favor of several defendants and denied the Landrums' remaining claims after a bench trial.The Supreme Court of Mississippi reviewed the case and affirmed the lower court's decision to disqualify Jill as a derivative plaintiff and exclude the Landrums' expert witness. The court found that Jill's personal interests and actions, such as failing to make required contributions and attempting to gain control of the company, justified her disqualification. The court also affirmed the dismissal of claims for negligent omission, misstatement of material facts, civil conspiracy, fraud, and fraudulent concealment due to the Landrums' failure to cite legal authority.However, the Supreme Court reversed and remanded the case on the issues of remedies and attorneys' fees under the Second Memorandum of Understanding (MOU) and the alleged breach of fiduciary duty between B&S and Jill. The court found that the chancellor erred in interpreting the Second MOU as providing an exclusive remedy and remanded for further proceedings to determine if Livingston is entitled to additional remedies and attorneys' fees. The court also remanded for factual findings on whether B&S breached its fiduciary duty to Jill regarding property distribution and tax loss allocation. View "Landrum v. Livingston Holdings, LLC" on Justia Law

Petitioners opened brokerage accounts with Stifel, Nicolaus & Company, managed by Coleman Devlin. Dissatisfied with Devlin's performance, they filed for arbitration with the Financial Industry Regulatory Authority (FINRA), alleging negligence, breach of contract, breach of fiduciary duty, negligent supervision, and violations of state and federal securities laws. After nearly two years of hearings, the arbitration panel ruled in favor of Stifel and Devlin without providing a detailed explanation, as the parties did not request an "explained decision."Petitioners moved to vacate the arbitration award in the United States District Court for the District of Maryland, arguing that the arbitration panel manifestly disregarded the law, including federal securities law. The district court denied the motion, stating that the petitioners failed to meet the high standard required to prove manifest disregard of the law. The court noted that the petitioners were essentially rearguing their case from the arbitration.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court noted that the Supreme Court's decision in Badgerow v. Walters requires an independent jurisdictional basis beyond the Federal Arbitration Act (FAA) itself for federal courts to have jurisdiction over petitions to vacate arbitration awards. Since the petitioners did not provide such a basis, the Fourth Circuit vacated the district court's judgment and remanded the case with instructions to dismiss the petition for lack of jurisdiction. The court emphasized that claims of manifest disregard of federal law do not confer federal-question jurisdiction. View "Friedler v. Stifel, Nicolaus, & Company, Inc." on Justia Law

The case involves a 2009 loan transaction between TNE Limited Partnership (TNE) and the Muir Second Family Limited Partnership (the Muir Partnership) at a time when the Muir Partnership was dissolved. The plaintiffs, including the Muir Partnership, Dorothy Jeanne Muir, and Wittingham, LLC, sought to void the transaction. After a seven-day bench trial, the district court ruled in favor of the plaintiffs, declaring the transaction void and denying their request for attorney fees.TNE appealed, arguing that the transaction was voidable, not void, and the plaintiffs cross-appealed the denial of attorney fees. The Utah Supreme Court, in Wittingham III, agreed with TNE that the transaction was voidable and remanded the case to the district court to determine whether the transaction bound the dissolved Muir Partnership and whether TNE was entitled to legal or equitable remedies. The court also instructed the district court to reconsider the attorney fees issue if plaintiffs renewed it on remand.On remand, the district court concluded that Nick Muir, who executed the transaction on behalf of the Muir Partnership, lacked both actual and apparent authority to bind the Partnership. The court also found that the plaintiffs were injured by the transaction and could void it. However, the court again denied the plaintiffs' request for attorney fees, interpreting the trust deed's fee provision as not applicable to the plaintiffs' action to invalidate the transaction. TNE's subsequent rule 60(b) motion, arguing that new authority from the Utah Supreme Court changed the controlling law on apparent authority, was denied.The Utah Supreme Court affirmed the district court's rulings. It held that TNE failed to show any manifestation of the Muir Partnership’s consent to Nick’s authority, either direct or indirect. The court also found that the district court did not err in allowing the Muir Partnership to void the transaction and that the plaintiffs were not entitled to attorney fees under the trust deed. View "Wittingham v. TNE Limited Partnership" on Justia Law

The case involves two nonprofit organizations, the National Federation of the Blind of Texas and Arms of Hope, which use donation boxes to collect items for fundraising. The City of Arlington, Texas, enacted an ordinance regulating the placement and maintenance of these donation boxes, including zoning restrictions and setback requirements. The nonprofits challenged the ordinance, claiming it violated the First Amendment by restricting their ability to place donation boxes in certain areas of the city.The United States District Court for the Northern District of Texas reviewed the case. The court granted summary judgment in favor of Arlington on several counts, including the constitutionality of the setback requirement and the ordinance not being overbroad or a prior restraint. However, the court ruled in favor of the nonprofits on the zoning provision, finding it was not narrowly tailored and thus violated the First Amendment. The court enjoined Arlington from enforcing the zoning provision against the nonprofits.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the ordinance was content-neutral and subject to intermediate scrutiny. It found that the zoning provision, which limited donation boxes to three of the city's 28 zoning districts, was narrowly tailored to serve Arlington's significant interests in public health, safety, welfare, and community aesthetics. The court also upheld the setback requirement, finding it did not burden more speech than necessary and left ample alternative channels of communication. The court concluded that the ordinance's permitting provisions did not constitute an unconstitutional prior restraint.The Fifth Circuit vacated the district court's judgment regarding the zoning provision and rendered judgment in favor of Arlington on that part. The rest of the district court's judgment was affirmed. View "National Federation of the Blind of Texas, Incorporated v. City of Arlington" on Justia Law

In 2017, the SEC filed a lawsuit against investment advisers Louis Navellier and Navellier & Associates, Inc. (NAI), alleging violations of sections 206(1) and 206(2) of the Investment Advisers Act. The SEC claimed that the defendants made materially false and misleading statements about the performance track record of their investment strategies. The United States District Court for the District of Massachusetts granted summary judgment in favor of the SEC, ordering disgorgement exceeding $22 million. The defendants appealed, challenging the summary judgment, the denial of their motion to stay pending appeal, and the denial of their motion to reduce the supersedeas bond.The district court found that the defendants had violated sections 206(1) and 206(2) by making false statements about the inception date and performance of the AlphaSector strategy, which they marketed as having been live-traded since 2001. The court determined that these statements were material and that the defendants acted with scienter (intent to defraud) or, at the very least, negligence. The court also rejected the defendants' selective enforcement defense, concluding that they were not similarly situated to other firms that were not prosecuted.The United States Court of Appeals for the First Circuit reviewed the case and affirmed the district court's decisions. The appellate court agreed that the defendants' statements were false and material, and that they acted with a high degree of recklessness, satisfying the scienter requirement. The court also upheld the disgorgement order, finding it to be a reasonable approximation of the profits causally connected to the violations. The court rejected the defendants' argument that disgorgement was inappropriate because their clients did not suffer pecuniary harm, emphasizing that disgorgement is meant to deprive wrongdoers of their ill-gotten gains. Finally, the court found no abuse of discretion in the district court's decision not to reduce the supersedeas bond amount. View "SEC v. Navellier & Associates, Inc." on Justia Law

Tegra Corporation, a minority interest holder in Lite-Form Technologies, LLC, filed a derivative action against Patrick Boeshart, the LLC’s manager and president, and Sandra Boeshart, the LLC’s bookkeeper and office manager. Tegra alleged that the Boesharts used their positions to enrich themselves at the expense of the LLC. Specific allegations included engaging the LLC in above-market leases with entities they controlled, paying themselves excessive salaries and bonuses, and mismanaging LLC funds by charging personal expenses to the LLC.The District Court for Dakota County dismissed the derivative claims, concluding that a special litigation committee (SLC) appointed under Neb. Rev. Stat. § 21-168 had conducted its investigation and made its recommendation in good faith, independently, and with reasonable care. The SLC, led by Cody Carse, recommended that the claims be settled through a member meeting rather than litigation. Tegra appealed, arguing that the SLC did not act with reasonable care.The Nebraska Supreme Court reviewed the case de novo and found that the SLC did not exercise reasonable care in its investigation. The court noted that Carse failed to consider the legal elements of Tegra’s claims, did not conduct a cost-benefit analysis, and improperly delegated his duties to the LLC’s members. The court emphasized that Carse’s investigation lacked thoroughness and that he did not adequately assess the potential recovery for the LLC. Consequently, the court reversed the district court’s dismissal of the derivative claims and remanded the case for further proceedings, instructing the district court to dissolve any stay of discovery and allow the action to proceed under Tegra’s direction. The dismissal of Tegra’s individual claims was affirmed. View "Tegra Corp. v. Boeshart" on Justia Law

Plaintiffs-Appellants, a group of produce suppliers, sold produce to Lonestar Produce Express, LLC, a produce broker started by Leonidez Fernandez III and Eric Fernandez. Their father, Leonidez Fernandez Jr., frequently assisted them. By mid-2019, Lonestar owed approximately $221,000 to Plaintiffs-Appellants for unpaid produce invoices. Plaintiffs-Appellants sought relief under the Perishable Agricultural Commodities Act (PACA), which requires produce buyers to hold produce or proceeds from its sale in trust for unpaid suppliers until full payment is made. If the merchant's assets are insufficient, others who had a role in causing the breach of trust may be held secondarily liable.The United States District Court for the Western District of Texas held a bench trial to determine whether Leonidez Fernandez Jr. could be held individually liable under PACA. The court found that Leonidez Jr. was not a member, manager, or employee of Lonestar and did not have control over its financial operations. Consequently, the district court concluded that Leonidez Jr. did not owe a fiduciary duty under PACA and was not liable for Lonestar's debts.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that individuals who are not members of an LLC can still be held secondarily liable under PACA if they have control over the trust assets. However, the court found that Leonidez Jr. did not have the requisite control over Lonestar's PACA trust assets. He was not authorized to direct payments, was not a signatory on the bank account, and did not contribute financially to Lonestar. Therefore, the Fifth Circuit affirmed the district court's decision, concluding that Leonidez Jr. was not liable under PACA. View "A & A Concepts v. Fernandez" on Justia Law