Justia Business Law Opinion Summaries

A dispute arose among members of a family-owned limited liability company (LLC) established in 1994 with an original dissolution date of December 31, 2024. In 2015, one member, Seth, provided notice of his withdrawal. Shortly after, the remaining members—Horatio (the siblings’ father), Cameron, and Lindsay—held a meeting and, over Lindsay’s objection, voted by supermajority to convert the LLC to a perpetual-term entity. This action was later formalized through an amendment filed with the state. Horatio subsequently passed away, and Cameron became personal representative of his estate, controlling Horatio’s LLC interest.After these events, Lindsay, individually, on behalf of her minor children, and as a derivative plaintiff for the LLC, initiated an action in the Montana Sixth Judicial District Court. She sought a declaratory judgment enforcing the operating agreement’s (OA) dissolution provision and contended that the OA required unanimous written consent for amendment—rendering the 2015 supermajority vote ineffective. Cameron moved to dismiss some claims and later sought to join the LLC as a defendant. The District Court denied the motion to dismiss, granted summary judgment to Cameron and the LLC on the validity of the amendment, ordered the LLC joined as a defendant, and required Lindsay to pay fees for a non-party hybrid witness’s deposition.The Supreme Court of the State of Montana reviewed the case. The court held that the OA provided two valid pathways to amendment—by unanimous written consent or by a 67% supermajority, and that the 2015 vote validly converted the LLC to a perpetual entity. The court affirmed the District Court’s grant of summary judgment and its joinder order. However, it reversed the order requiring Lindsay to pay the non-party witness’s fees, limiting compensation to the statutory witness fee unless otherwise agreed. The judgment was affirmed in part, reversed in part, and remanded with instructions. View "Barbier v. Burns" on Justia Law

A student athlete who played football at Rutgers University challenged two NCAA Division I bylaws that counted seasons played at junior colleges toward the NCAA’s limit of four seasons of eligibility over a five-year period. The athlete, Jett Elad, had played at Ohio University, Garden City Community College (a junior college), and UNLV, exhausting his eligibility under the rule despite only playing three seasons at NCAA Division I schools. After learning of a favorable ruling for another athlete in a similar situation, Elad sought a waiver from the NCAA, which was denied. He then entered the transfer portal, was recruited by Rutgers, received a lucrative NIL contract, and filed suit seeking an injunction to allow him to play an additional season.The United States District Court for the District of New Jersey granted Elad a preliminary injunction, preventing the NCAA from counting his junior college season toward his eligibility limit. The NCAA appealed, arguing that the rule was not subject to antitrust scrutiny and that the lower court had failed to properly define the relevant market for its antitrust analysis.The United States Court of Appeals for the Third Circuit reviewed the case and applied de novo review to the district court’s legal conclusions and clear error review to factual findings. The appellate court held that NCAA eligibility rules are not categorically exempt from Sherman Act scrutiny and that the challenged “JUCO Rule” had a commercial effect because it restrained participation in the college football labor market. However, the court found that the district court erred by failing to adequately define the relevant market and by relying on outdated market realities that did not reflect changes following NCAA v. Alston. The Third Circuit vacated the preliminary injunction and remanded for further proceedings, instructing the lower court to conduct a proper market analysis. View "Elad v. NCAA" on Justia Law

Edward Richard obtained a loan from The County Federal Credit Union to purchase a 2022 Ski-Doo Expedition snowmobile. The credit union took a security interest in the snowmobile and filed a UCC1 Financing Statement with the Maine Secretary of State. Over a year later, Richard sold the snowmobile to Michael Madore Jr., who purchased it as a gift for his father, Michael Madore. Richard did not inform the credit union of the sale and assured Madore Jr. that no liens existed. The Madores did not investigate for liens or UCC filings. After Richard defaulted on the loan and failed to cure, the credit union discovered that Madore possessed the snowmobile.The County Federal Credit Union filed a complaint for recovery of personal property in the District Court (Fort Kent, Maine), naming both Richard and Madore as defendants. Richard declared bankruptcy and received a discharge. Following a hearing, the District Court entered judgment for the credit union, ordering Madore to surrender the snowmobile. Madore then requested additional findings, which the court provided, and subsequently appealed.The Maine Supreme Judicial Court reviewed the appeal. It held that the credit union had a valid security interest in the snowmobile because the signed loan documents met the statutory requirements: they were authenticated by Richard, created a security interest, and described the collateral. The Court rejected Madore’s argument that the absence of Richard’s signature on a separate “Security Agreement” page rendered the security interest unenforceable. Additionally, the Court found that Madore could not claim status as a bona fide purchaser for value without notice under 11 M.R.S. § 9-1320(2), because the credit union had filed its financing statement before the sale. The judgment of the District Court was affirmed. View "The County Federal Credit Union v. Madore" on Justia Law

Three siblings, who are stockholders in a closely held, family-run Delaware corporation that streams sports content, sought access to the company’s books and records. The siblings were dissatisfied with the lack of financial information and annual meetings after their brother was replaced as CEO. Their motivation was to value their shares and possibly sell them. Over a ten-month period, the siblings made three separate demands under Section 220 of the Delaware General Corporation Law, each seeking inspection of various corporate documents. The company denied all three demands, asserting that each failed to satisfy the statute’s procedural “form and manner” requirements for such demands.After the company denied the demands, the siblings filed a complaint in the Delaware Court of Chancery to compel inspection. The matter was first reviewed by a Magistrate in Chancery, who found that the third demand satisfied the statutory waiting period and that the siblings had a proper purpose for inspection, granting most of the requested documents except for tax-related items. The Magistrate also ordered the parties to negotiate a confidentiality agreement. Both parties filed exceptions to the Magistrate’s report, and the Court of Chancery conducted further review.The Court of Chancery ultimately found that all three demands failed to meet Section 220’s procedural requirements. It ruled that the first demand was deficient for lack of oath, power of attorney, and identification of stockholders; the second demand failed because affidavits verifying the demand were signed before the demand was finalized, with no evidence the verified version matched the final one; and the third demand was rejected because the siblings applied to the court before the statutory five-day waiting period had elapsed. Judgment was entered for the company.On appeal, the Supreme Court of Delaware affirmed the Court of Chancery’s decision. It held that strict compliance with Section 220’s form and manner requirements is necessary, and that the siblings failed to meet those requirements for all three demands. View "Martin Floreani v. FloSports, Inc." on Justia Law

The case involves a Florida-based title insurer that suffered significant financial setbacks, prompting a series of business restructurings and asset transfers. In 2009, the company entered a joint venture with another title insurance group, forming a new entity to handle certain business functions. Over subsequent years, the original company retained substantial assets and continued operations, but further financial decline led to a 2015 agreement in which it transferred assets and liabilities to its business partner, in exchange for the assumption of its policy liabilities. The Florida insurance regulator scrutinized and ultimately approved the transaction after requiring additional commitments from the acquiring party.The United States Bankruptcy Court for the Middle District of Florida later oversaw the company’s Chapter 11 proceedings. The appointed Creditor Trustee brought an adversary proceeding against the acquiring parties and related entities, alleging that the asset transfer constituted a fraudulent transfer under federal bankruptcy law and Florida statutes, and sought to impose successor liability and alter ego claims. The bankruptcy court held a bench trial, excluding portions of the Trustee’s expert valuation as unreliable, and found that the company had received reasonably equivalent value in the transaction. The court also rejected the successor liability and alter ego theories, finding insufficient evidence of continuity of ownership, improper purpose, or harm to creditors.The United States District Court for the Middle District of Florida affirmed the bankruptcy court’s rulings. On appeal, the United States Court of Appeals for the Eleventh Circuit reviewed the record and affirmed the district court’s order. The Eleventh Circuit held that the bankruptcy court did not err in excluding the Trustee’s expert, that the asset transfer was for reasonably equivalent value and not fraudulent, and that the successor liability and alter ego claims failed for lack of evidence and legal sufficiency. View "Stermer v. Old Republic National Title Insurance Company" on Justia Law

Craig Medoff, after a history of violating federal securities laws and failing to comply with prior court orders and penalties, was subject to a 2016 consent judgment in the District of Massachusetts that barred him and any entity he controlled from participating in the issuance, offer, or sale of any security for ten years. Despite this, Medoff continued to control Nova Capital International LLC and engaged in securities-related activities, using an alias and receiving substantial fees in violation of the judgment. The SEC initiated civil contempt proceedings, but the district court, concerned about the futility of further civil sanctions given Medoff’s history and financial situation, instead initiated criminal contempt proceedings under 18 U.S.C. § 401(3) and Federal Rule of Criminal Procedure 42(a).The United States District Court for the District of Massachusetts appointed the U.S. Attorney to prosecute the criminal contempt case. Medoff’s counsel moved for the judge’s recusal under 28 U.S.C. § 455(a), arguing that the judge’s impartiality might reasonably be questioned due to his comments and conduct during the proceedings. The district court denied the recusal motion, finding no reasonable basis for doubting its impartiality, and proceeded with the criminal case. Medoff ultimately pleaded guilty to criminal contempt and was sentenced to twenty months in prison, a variance above the guideline range, and thirty-six months of supervised release, along with a fine.On appeal to the United States Court of Appeals for the First Circuit, Medoff challenged the denial of the recusal motion and the reasonableness of his sentence. The First Circuit held that the district court did not abuse its discretion in denying recusal, as the judge’s actions did not display deep-seated antagonism or favoritism. The court also found the sentence both procedurally and substantively reasonable, affirming the district court’s judgment. View "United States v. Medoff" on Justia Law

Two Saudi Arabian companies, Al Rushaid Petroleum Investment Company and Al Rushaid Trading Company, specialized in helping foreign manufacturers access the Saudi oil and gas market. Over several decades, they entered into various agreements with Dresser-Rand Group (DRG), including exclusive sales representation and joint venture contracts related to the sale and servicing of DRG products in Saudi Arabia. In 2014, Siemens Energy announced its acquisition of DRG, which was completed in 2015. After the acquisition, Al Rushaid alleged that Siemens excluded them from contracts and joint venture benefits, misused proprietary information, and diverted business opportunities.The United States District Court for the Middle District of Florida first dismissed Al Rushaid’s original complaint as an impermissible shotgun pleading but allowed amendment. Al Rushaid then filed an amended complaint asserting claims for tortious interference, unfair competition, and unjust enrichment. The district court dismissed all claims without prejudice, finding that Siemens was not a stranger to the relevant business relationships due to its ownership of DRG, that the unfair competition claim was improperly pleaded and lacked necessary elements, and that the unjust enrichment claim failed to meet pleading standards.On appeal, the United States Court of Appeals for the Eleventh Circuit reviewed the district court’s dismissal de novo. The Eleventh Circuit affirmed the district court’s judgment in all respects. The court held that Siemens, as owner of DRG, was not a stranger to the contracts or business relationships under Florida law, defeating the tortious interference claims. The unfair competition claim was dismissed as a shotgun pleading and for failure to allege required elements. The unjust enrichment claim was dismissed for lack of clarity and because express contracts governed the subject matter. The district court’s dismissal of all claims without prejudice was affirmed. View "Al Rushaid Petroleum Investment Company v. Siemens Energy Incorporated" on Justia Law

A nonprofit corporation purchased a 192-unit apartment complex from a government agency in 1994 at a significant discount. In exchange, the purchaser agreed by contract to rent all units at below-market rates to low-income families for 40 years and to comply with annual reporting and administrative fee requirements. Around 2016, the purchaser stopped fulfilling these obligations, including the reporting and fee provisions. The government’s successor agency, through its monitoring agent, notified the purchaser of the breach and initiated legal action seeking remedies under the contract.The purchaser counterclaimed in state court, seeking a declaration that the agreement was no longer enforceable and an injunction against further enforcement. The Federal Deposit Insurance Corporation (FDIC), as successor to the original government agency, intervened, removed the case to the United States District Court for the Middle District of Florida, and moved to dismiss the counterclaim. The purchaser argued that the contract’s obligations ended when Congress repealed the statute that created the original agency and authorized such agreements. The district court rejected this argument, holding that the contract remained enforceable, dismissed the counterclaim with prejudice, and remanded the case to state court.The United States Court of Appeals for the Eleventh Circuit reviewed the case. It held that the contract’s plain language required the purchaser to comply with its obligations for the full 40-year term, regardless of the repeal of the underlying statute. The court found that the FDIC, as successor, retained both contractual and statutory authority to enforce the agreement. The Eleventh Circuit affirmed the district court’s dismissal of the counterclaim, concluding that the agreement remains enforceable and the purchaser is still bound by its terms. View "Affordable Housing Group, Inc. v. Florida Housing Affordability, Inc." on Justia Law

The defendant formed a company in 2005 that solicited funds from clients through financial agreements promising fixed returns, with the stated purpose of developing various businesses. Clients entered into these agreements, called "Productive Development Contracts," by making monetary contributions in exchange for promised earnings. The company failed to fulfill its obligations, and the government alleged that the defendant operated a Ponzi scheme, using funds from later clients to pay earlier ones, without generating legitimate profits. The indictment listed specific transactions involving eight clients, and at trial, both these and additional clients testified about their experiences and losses.The case was tried in the United States District Court for the District of Puerto Rico. The government presented evidence including client testimony, bank records, and summary exhibits prepared by a forensic accountant. The defendant objected to the admission of certain summary exhibits under Federal Rule of Evidence 1006, arguing they contained hearsay and improper conclusions. The district court overruled these objections, and the jury convicted the defendant on all counts. At sentencing, the court calculated loss and restitution amounts based on both testifying and non-testifying victims, resulting in a sentence of 135 months’ imprisonment and a restitution order exceeding $2.1 million. The defendant appealed, challenging the evidentiary rulings, sufficiency of the evidence, sentencing calculations, and restitution order.The United States Court of Appeals for the First Circuit affirmed the securities fraud conviction, sentence, and restitution order, but vacated the bank fraud convictions at the government’s request. The court held that any error in admitting the summary exhibits was harmless given the overwhelming unchallenged evidence. It found sufficient evidence supported the jury’s finding that the contracts were securities under the law. The court also upheld the district court’s loss and restitution calculations, concluding they were supported by reliable evidence and not plainly erroneous. View "United States v. Maldonado-Vargas" on Justia Law

A Maryland real estate investment trust with over 12,000 shareholders entered into an advisory agreement with UMTH General Services, L.P. and its affiliates to manage the trust’s investments and operations. The agreement stated that the advisor was in a fiduciary relationship with the trust and its shareholders, but individual shareholders were not parties to the agreement. After allegations of mismanagement and improper advancement of legal fees surfaced, a shareholder, Nexpoint Diversified Real Estate Trust, sued derivatively in Maryland. The Maryland court dismissed the claims for lack of standing and subject matter jurisdiction. Nexpoint then transferred its shares to a subsidiary, which, along with Nexpoint, sued the advisors directly in Texas, alleging corporate waste and mismanagement, and claimed the advisory agreement created a duty to individual shareholders.In the 191st District Court of Dallas County, the advisors filed a plea to the jurisdiction, a verified plea in abatement, and special exceptions, arguing that the claims were derivative and belonged to the trust, so the shareholders lacked standing and capacity to sue directly. The trial court denied these motions. The advisors sought mandamus relief from the Fifth Court of Appeals, which was denied, and then petitioned the Supreme Court of Texas.The Supreme Court of Texas held that while the shareholders alleged a financial injury sufficient for constitutional standing, they lacked the capacity to sue individually because the advisory agreement did not create a duty to individual shareholders, nor did it confer third-party beneficiary status. The agreement benefited shareholders collectively through the trust, not individually. The court conditionally granted mandamus relief, directing the trial court to vacate its order and dismiss the case with prejudice, holding that shareholders must pursue such claims derivatively and in the proper forum as specified by the trust’s governing documents. View "IN RE UMTH GENERAL SERVICES, L.P." on Justia Law