Justia Business Law Opinion Summaries

A non-medical entrepreneur, Randhir Tuli, helped form a medical business with Dr. Andrew Brooks, creating a group of surgery centers. Tuli, who was initially active, later became inactive but continued to take profits. His colleagues, frustrated by his inactivity, sought to buy him out, but Tuli refused. Tuli then sent a threatening letter to potential investors, suggesting criminal liability, without a good faith basis. In response, the company warned Tuli to rectify the situation within 30 days or face ejection without compensation. Tuli did not comply, and the company ejected him, paying him nothing. Tuli then initiated a decade-long litigation against his former colleagues.The Superior Court of Los Angeles County rejected all of Tuli’s claims. Tuli appealed, and the case was reviewed by the Court of Appeal of the State of California, Second Appellate District, Division Eight. The trial court had granted summary judgment in favor of the defendants, finding that the business judgment rule protected the company’s decision to eject Tuli. The court found that the company acted rationally to protect its interests and that Tuli’s letter was disruptive and baseless.The Court of Appeal affirmed the lower court’s decision. It held that the business judgment rule applied, as the company’s actions were rational and in the best interest of the business. The court found no conflict of interest, bad faith, or improper investigation by the company. It also ruled that Tuli’s claims for declaratory relief, unfair competition, breach of fiduciary duty, and breach of the covenant of good faith and fair dealing were without merit. The court concluded that Tuli’s ejection and the zero-dollar redemption of his shares were not an illegal forfeiture, as Tuli had already received substantial returns on his investment and had disrupted the business. View "Tuli v. Specialty Surgical Center of Thousand Oaks, LLC" on Justia Law

The case involves a failed business venture between longtime friends, resulting in a $20 million judgment against Stanley N. Cohen for negligent misrepresentation. Cohen, a professor at Stanford University, and his colleague discovered a genetic mutation related to Huntington’s disease and formed a company, Nuredis, with Moshe and Chris Alafi, who invested $20 million. The FDA later rejected Nuredis’s request to conduct human clinical trials for the drug HD106 due to its toxicity. The Alafis sued Cohen and his colleague for negligent misrepresentation and other related causes, alleging they failed to disclose the drug’s history of being withdrawn from the market due to toxicity.The Santa Clara County Superior Court held a bench trial and found in favor of the plaintiffs on the negligent misrepresentation claim against Cohen, awarding $20 million in damages. The court did not reach the other causes of action. Cohen appealed, arguing that the claim failed as a matter of law and that the trial court committed prejudicial error by not issuing a statement of decision upon his request.The California Court of Appeal, Sixth Appellate District, found that the trial court’s failure to issue the requested statement of decision was prejudicial error, as it prevented effective appellate review of the trial court’s factual and legal findings. Consequently, the appellate court did not address Cohen’s arguments on the merits and reversed and remanded the case for the trial court to issue the statement of decision. View "Alafi v. Cohen" on Justia Law

A disabled woman, T.M.B., was sexually assaulted by an employee of West Mont, a nonprofit organization contracted by the State of Montana to provide community-based services for developmentally disabled individuals. T.M.B. sued both the State and West Mont, alleging they owed her a nondelegable duty of care. The District Court granted summary judgment in favor of both defendants, concluding neither owed a nondelegable duty of care for the employee’s criminal acts. T.M.B. appealed.The District Court of the First Judicial District, Lewis and Clark County, found that the State had satisfied its statutory obligations by contracting with West Mont to provide services and did not owe a nondelegable duty to T.M.B. because she was not under state custody or control. The court also found that West Mont did not owe a nondelegable duty, as there was no statute or rule explicitly stating such a duty existed for state contractors operating community homes.The Supreme Court of the State of Montana reviewed the case. It affirmed the District Court’s decision regarding the State, agreeing that the State did not have a close, continuing relationship with T.M.B. that would impose a nondelegable duty. However, the Supreme Court reversed the decision regarding West Mont, finding that the relationship between West Mont and T.M.B. was sufficiently close and continuing to impose a nondelegable duty under Restatement (Second) of Agency § 214. The court held that West Mont had a duty to protect T.M.B. from harm due to her dependence on their care and supervision. The case was remanded for further proceedings consistent with this opinion. View "T.M.B v. West Mont" on Justia Law

Plaintiff, Shareholder Representative Services LLC, acting as the Equityholder Representative, filed a breach of contract action against Defendant, Renesas Electronics Corporation. The dispute arises from a 2021 Merger Agreement under which Renesas acquired Celeno Communications Incorporated. Plaintiff alleges that Renesas failed to pay two Earn-Out Milestone payments related to the development of a semiconductor chip, the [REDACTED] Product, as stipulated in the Merger Agreement. Plaintiff seeks damages and specific performance of certain contractual provisions.The Court of Chancery assigned the action to the current court on November 6, 2023. Plaintiff filed its Verified Complaint on October 31, 2023, and Renesas moved to partially dismiss the complaint. Plaintiff then filed a Verified Amended Complaint on February 28, 2024, asserting four breach of contract claims. Renesas sought dismissal of Counts One, Two, and Four. Plaintiff opposed the motion, and Renesas replied. A hearing was held on September 5, 2024, after which the court took the motion under advisement.The Court of Chancery of the State of Delaware reviewed the case. The court granted in part and denied in part Renesas's partial motion to dismiss. The court denied the motion regarding Counts One and Two, finding that Plaintiff had sufficiently alleged that the Tape-Out Milestone and Mass Production Milestone were met, despite Renesas's arguments to the contrary. However, the court granted the motion regarding Count Four, determining that specific performance of the meeting requirement was not warranted, as monetary damages would provide an adequate remedy. The court found that the contractual provision establishing irreparable harm was sufficient but noted that the ultimate relief sought was payment of the Earn-Out Amounts, not a meeting. View "Shareholder Representative Service LLC v. Renesas Electronics Corp." on Justia Law

A nonprofit corporation, Moving Oxnard Forward (MOF), challenged campaign finance limitations in the Oxnard City Code, alleging they violated the First Amendment. The limitations, adopted by the City of Oxnard, California, primarily affected Aaron Starr, MOF's President, who had a history of receiving large contributions and challenging the City Council's policies. Starr had previously led recall efforts against the City Council and ran for Mayor, relying on larger-dollar contributions.The United States District Court for the Central District of California granted summary judgment in favor of the City, upholding the campaign finance limitations. MOF appealed the decision, arguing that the limitations were designed to target and suppress Starr's political activities rather than to prevent corruption.The United States Court of Appeals for the Ninth Circuit reviewed the case and found significant "danger signs" of invidious discrimination against Starr. The court noted that the legislative record and the practical impact of the limitations disproportionately affected Starr, who had been a vocal critic of the City Council. The court also found that the City's justification for the limitations, based on a 2010 corruption scandal, was tenuous and unrelated to campaign contributions.The Ninth Circuit concluded that the contribution limits were not narrowly tailored to the City's interest in preventing quid pro quo corruption. Instead, the limits appeared to be more closely drawn to suppress Starr's political activities. As a result, the court reversed the district court's decision and remanded with instructions to grant summary judgment in favor of MOF, holding that the per-candidate aggregate contribution limitations in the Oxnard City Code violated the First Amendment. View "MOVING OXNARD FORWARD, INC. V. ASCENSION" on Justia Law

Teradata Corporation sued SAP SE, alleging that SAP illegally conditioned sales of its business-management software (S/4HANA) on the purchase of its back-end database engine (HANA) in violation of Section 1 of the Sherman Act and misappropriated Teradata’s trade secrets under the California Uniform Trade Secrets Act. Teradata claimed that SAP’s tying arrangement forced customers to buy HANA, harming competition in the enterprise data warehousing (EDW) market. Teradata also alleged that SAP used its confidential batched merge method, a technique for efficient data aggregation, without authorization.The United States District Court for the Northern District of California granted summary judgment in favor of SAP. The court excluded Teradata’s expert testimony on market definition and market power, finding the methodology unreliable. Without this testimony, the court concluded that Teradata failed to create a material dispute on its tying claim. The court also ruled against Teradata on the trade secret claim, stating that Teradata did not properly designate the batched merge method as confidential and that the agreements between the parties gave SAP the right to use the method.The United States Court of Appeals for the Ninth Circuit reversed the district court’s summary judgment. The appellate court held that the district court abused its discretion by excluding the expert’s testimony, which was based on reasonable methodologies. The court found that Teradata raised a triable issue regarding SAP’s market power in the tying market and the anticompetitive effects in the tied market. The court also determined that there were material factual disputes regarding whether Teradata properly designated the batched merge method as confidential and whether the agreements allowed SAP to use the method. The case was remanded for further proceedings. View "TERADATA CORPORATION V. SAP SE" on Justia Law

LKQ Corporation, a Delaware corporation in the auto salvage and recycled parts business, designated certain employees as "Key Persons" eligible for Restricted Stock Units (RSUs) through RSU Agreements. These agreements included non-competition clauses and provisions for forfeiture of RSUs and any stock issued if the employee competed with LKQ within nine months post-departure. Robert Rutledge, a plant manager at LKQ, signed these agreements and received stock under them. In April 2021, Rutledge resigned and joined a competitor shortly after.LKQ sued Rutledge in Illinois federal court for breach of contract and unjust enrichment, seeking to enjoin him from working for a competitor and to recover proceeds from the sale of LKQ stock. The district court dismissed the unjust enrichment claim and granted summary judgment for Rutledge on the contract claims, holding that the non-competition provisions were unreasonable restraints of trade under Illinois law and unenforceable under Delaware law, based on the Court of Chancery's decision in Ainslie v. Cantor Fitzgerald, L.P.The United States Court of Appeals for the Seventh Circuit affirmed the district court's dismissal of the unjust enrichment claim and the summary judgment ruling on the Restrictive Covenant Agreements. However, it was uncertain about the enforceability of the RSU Agreements' forfeiture-for-competition provisions under Delaware law, especially after the Delaware Supreme Court reversed the Court of Chancery's decision in Cantor Fitzgerald. The Seventh Circuit certified two questions to the Delaware Supreme Court regarding the applicability of Cantor Fitzgerald outside the limited partnership context.The Delaware Supreme Court held that the principles from Cantor Fitzgerald, which endorse the employee choice doctrine and prioritize freedom of contract, apply beyond the limited partnership context, including to RSU agreements. The court emphasized that forfeiture-for-competition provisions do not restrict competition or an employee's ability to work and should be treated as enforceable terms subject to ordinary breach of contract defenses. View "LKQ Corp. v. Rutledge" on Justia Law

Andrew Hackett, a stock promoter, was convicted of conspiracy to commit securities fraud and securities fraud related to the manipulative trading of a public company's stock. Hackett engaged in a pump-and-dump scheme, promoting the stock of First Harvest (later renamed Arias Intel) and recruiting others to do the same. He used call rooms to solicit investors and artificially inflate the stock price before selling his shares. The scheme was exposed by an FBI informant, leading to Hackett's conviction.The United States District Court for the Southern District of California sentenced Hackett to forty-six months of imprisonment, applying a sixteen-level sentencing enhancement under U.S.S.G. § 2B1.1(b)(1)(I) for a loss exceeding $1.5 million. The court calculated an intended loss of $2.2 million based on Hackett's ownership of 550,000 shares and his intent to sell them at four dollars per share. Hackett's counsel objected to the loss calculation but did not argue that intended loss was an improper measure of loss.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court's judgment. The Ninth Circuit held that the district court did not plainly err in relying on the guideline commentary defining "loss" as the greater of actual loss or intended loss. The court noted that any error was not clear or obvious given the precedent recognizing both actual and intended loss and the lack of consensus among circuit courts on this issue. The court applied plain error review because Hackett's objection to the loss calculation was not sufficiently specific to preserve de novo review. View "USA V. HACKETT" on Justia Law

The Caribe Resort Condominium Association Board of Directors, Larry Wireman, and Judy Wireman, along with Caribe Realty, Inc., Caribe, Inc., and Sentinels, LLC, sought a writ of mandamus to direct the Baldwin Circuit Court to dismiss derivative claims brought by Robert Simmons and other condominium-unit owners on behalf of the Caribe Resort Condominium Association. The claims included allegations of breaching duties, wasting corporate assets, entering into inflated self-dealing contracts, and misappropriating funds.The Baldwin Circuit Court denied the motion to dismiss, leading to the current petition. The petitioners argued that Alabama law does not recognize derivative actions on behalf of nonprofit corporations. They noted that while Alabama law allows derivative actions for for-profit corporations, limited-liability companies, and limited partnerships, it does not provide similar provisions for nonprofit corporations. They also pointed out that the Alabama Nonprofit Corporation Law, which adopted the Model Nonprofit Corporation Act, intentionally omitted the chapter on derivative proceedings.The Supreme Court of Alabama agreed that Alabama law does not generally recognize derivative actions for nonprofit corporations. However, it noted that under § 10A-3-2.44(2), Ala. Code 1975, members of a nonprofit corporation can bring a representative suit against officers or directors for exceeding their authority. The court found that the Caribe members' claims against the board defendants alleged that the board exceeded their authority, thus falling under this provision. However, claims against the Wireman companies did not fall under this provision and were due to be dismissed.The Supreme Court of Alabama granted the petition in part, dismissing the claims against the Wireman companies, and denied it in part, allowing the claims against the board defendants to proceed. View "Ex parte Caribe Resort Condominium Association Board of Directors" on Justia Law

The case involves Andris Pukke, Peter Baker, and John Usher, who were found liable for violations of the Federal Trade Commission Act, the Telemarketing Sales Rule, and a permanent injunction from a prior fraud case. They were involved in a real estate scam, selling lots in a development called "Sanctuary Belize" through deceptive practices. The district court issued an equitable monetary judgment of $120.2 million for consumer redress, imposed an asset freeze, and appointed a receiver.The United States District Court for the District of Maryland found the defendants liable after a bench trial and issued permanent injunctions against them. The court also held them in contempt for violating a prior judgment in a related case, ordering them to pay the same $120.2 million in consumer redress. The defendants appealed, and the United States Court of Appeals for the Fourth Circuit affirmed the district court's decision, except for vacating the monetary judgment to the extent it relied on FTC Act Section 13(b).The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's decision to maintain the receivership and asset freeze. The court held that the receivership and asset freeze were necessary to effectuate the injunctive relief and ensure that the defendants did not continue to profit from their deceptive practices. The court also found that the contempt judgment supported maintaining the receivership and asset freeze until the judgment was satisfied. The court emphasized the defendants' history of deceptive conduct and the need for a professional receiver to manage and distribute the assets to defrauded consumers. The judgment was affirmed. View "Federal Trade Commission v. Pukke" on Justia Law