Justia Business Law Opinion Summaries

In these consolidated cases involving alleged breaches of fiduciary duties the Supreme Court answered questions certified to it by the United States Bankruptcy Court for the District of Arizona by applying common law agency principles to questions involving fiduciary duties between members and managers of a limited liability company (LLC).The Court answered the three certified questions as follows: (1) a manager of an Arizona LLC owes common law fiduciary duties to the company; (2) a member of an Arizona LLC owes common law fiduciary duties to the company, provided that the member is an agent of the LLC; and (3) an Arizona LLC's operating agreement may lawfully limit or eliminate those fiduciary duties, but the agreement may not eliminate the implied contractual duty of good faith and fair dealing. View "Sky Harbor Hotel Properties, LLC v. Patel Properties, LLC" on Justia Law

Brooks, Debtor's CEO, was charged with financial crimes. In class action and derivative lawsuits, Debtor proposed a global settlement that indemnified Brooks for liability under the Sarbanes Oxley Act (SOX), 15 U.S.C. 7243. Cohen, Debtor’s former General Counsel and a shareholder, claimed that the indemnification was unlawful. The district court approved the settlement, Cohen, represented by CLM, appealed. The Second Circuit vacated, noting that the EDNY would determine CLM’s attorneys’ fees award. Debtor initiated Chapter 11 bankruptcy proceedings. The Bankruptcy Court confirmed Debtor’s liquidation plan, with a trustee to pursue Debtor’s interest in recouping its losses from the ongoing actions.Brooks died in prison. Because his appeal had not concluded, some of his convictions and restitution obligations were abated. Stakeholders negotiated a second global settlement agreement, under which $142 million of Brooks’ restrained assets were to be distributed to his victims; $70 million has been remitted to Debtor. The Bankruptcy Court awarded CLM fees for the SOX 304 claim; the amount would be determined if Debtor received any funds on account of the claim. CLM’s Fee Appeal remains pending at the district court.CLM requested a $25 million reserve for payment of its fees. The Bankruptcy Court ordered Debtor to set aside $5 million. CLM’s Fee Reserve Appeal remains pending. CLM then moved, unsuccessfully, for a stay of Second Settlement Agreement distributions. In its Stay Denial Appeal, CLM’s motion requesting a stay of distributions was denied. The Third Circuit affirmed. The $5 million reserve is sufficient. A $5 million attorneys’ fees award for 1,502.2 hours of legal work totaling $549,472.61 of documented fees would yield an hourly rate of $3,328.45 and a lodestar multiplier of over nine. In common fund cases where attorneys’ fees are calculated using the lodestar method, multiples from one to four are the norm. View "SS Body Armor I, Inc. v. Carter Ledyard & Milburn, LLP" on Justia Law

Pneuma sued a former employee, a competitor that employee went to work for, and a Pneuma investor, alleging several business torts including claims under the Comprehensive Computer Data Access and Fraud Act (Pen. Code section 502); for conversion; and for trespass to chattel relating to an internet domain. The investor filed a cross-complaint against Pneuma and its owner alleging they breached their investor agreement. The trial court ruled against Pneuma except on a single cause of action for trespass to chattel and ruled in favor of the investor on his cross-complaint. The court of appeal affirmed. A determination that a party engaged in trespass to chattel in a business context does not, without more, establish that the party engaged in an unlawful business practice under California’s Unfair Competition Law. (Bus. & Prof. Code section 17200). View "Pneuma International, Inc. v. Cho" on Justia Law

Media filed a Freedom of Information Act (FOIA) request with the U.S. Department of Agriculture (USDA), seeking the names and addresses of all retail stores that participate in the national Supplemental Nutrition Assistance Program (SNAP) and each store’s annual SNAP food stamp redemption data from fiscal years 2005-2010. The USDA declined the request, invoking FOIA Exemption 4, which shields from disclosure “trade secrets and commercial or financial information obtained from a person and privileged or confidential,” 5 U.S.C. 552(b)(4). The Eighth Circuit affirmed an order requiring disclosure. The USDA declined to appeal. The Food Marketing Institute, a trade association of grocers, was permitted to intervene. The Supreme Court reversed and remanded, first holding that Institute had standing. Where commercial or financial information is customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is “confidential” under Exemption 4. The Institute’s retailers customarily do not disclose store-level SNAP data or make it publicly available; to induce retailers to participate in SNAP and provide store-level information, the government has long promised retailers that it will keep their information private. The Court declined to “arbitrarily constrict Exemption 4 by adding limitations found nowhere in its terms.” View "Food Marketing Institute v. Argus Leader Media" on Justia Law

In this case’s previous appearance before the Georgia Supreme Court, the primary issue involved taxation of alcoholic beverages at the Hartsfield-Jackson Atlanta International Airport. Clayton County appealed the trial court’s partial grant of summary judgment to the City of College Park on claims the City was not receiving its statutorily mandated share of taxes collected on alcoholic beverages. When the parties could not resolve their dispute, the City filed a complaint naming as defendants the County and two businesses that operated within the Airport, Mack II, Inc. and General Wholesale Company (the “taxpayer defendants”). The complaint sought an interlocutory and permanent injunction against the County (as well as the taxpayer defendants), and a declaratory judgment as to the City’s and County’s division and collection of alcoholic beverage taxes, as well as the taxpayer defendants’ payment of those taxes. The complaint also asserted claims against the County for an accounting, unjust enrichment, attorney fees, and damages. Following a hearing, the trial court denied the County’s motion for judgment on the pleadings, finding that sovereign immunity does not apply to the City’s claims or the taxpayer defendants’ cross-claims for indemnity and contribution. The court granted the City’s motion for partial summary judgment on the declaratory judgment counts, finding that the Alcoholic Beverage Code, OCGA 3-3-1 et seq., permitted the City to impose alcoholic beverage tax only within its municipal limits and the County to impose such a tax only in the unincorporated areas of the County, that neither could impose and collect alcoholic beverage taxes within the other’s taxing jurisdiction, and that the taxpayer defendants had to submit tax monies only to the entity authorized to collect the funds. Ultimately, the Supreme Court vacated this judgment and remanded the case for consideration of the “threshold question of whether sovereign immunity applies at all in suits between political subdivisions of the same sovereign (like the City and the County).” The Supreme Court disagreed sovereign immunity did not apply to multiple issues raised by this case. The case was remanded for reconsideration. View "City of College Park v. Clayton County et al." on Justia Law

StoneMor sells funeral products and services and is required by state law to hold in trust a percentage of proceeds from “pre-need sales.” Under Generally Accepted Accounting Principles (GAAP), preneed sales held in trusts may not be represented as current revenue StoneMor issued nonGAAP financials that represented pre-need sales as a portion of current revenue; borrowed cash to distribute to investors the proceeds of preneed sales in the same quarter the sale was made; and used proceeds from equity sales to pay down the borrowed cash that funded those distributions. In 2016, StoneMor announced that it would restate about three years of previously-reported financial statements. Under GAAP regulations, StoneMor was temporarily prohibited from selling units and receiving corresponding equity proceeds. Plaintiffs allege that this prohibition caused StoneMor’s October 2016 unit distribution to fall by nearly half; StoneMor blamed the cut on salesforce issues. StoneMor’s unit price dropped by 45%. Investors sued under the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), and Rule 10b-5, alleging that Defendants made false or misleading statements, with scienter, which Plaintiffs relied on to their financial detriment. The Third Circuit affirmed the dismissal of the case for failure to satisfy the heightened pleading standards of the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4. In a securities fraud case, a defendant’s sufficient disclosure of information can render alleged misrepresentations immaterial. StoneMor’s disclosures sufficiently informed reasonable investors of the risks inherent in its business. View "Fan v. Stonemor Partners LP" on Justia Law

Pinky’s Aggregates, Inc., and its president, Dale Honsey, appealed the grant of summary judgment awarding Frontier Fiscal Services, LLC, $526,253.12 in its action for breach of contract and to collect on a personal guaranty. Because Pinky’s and Honsey failed to raise a genuine issue of material fact to preclude summary judgment, the North Dakota Supreme Court affirmed summary judgment. View "Frontier Fiscal Services LLC v. Pinky's Aggregates, Inc., et al." on Justia Law

Eight Ball Trucking, Inc., and David and Laurie Horrocks (collectively “defendants”) appealed from an order entered after the district court denied their motion under N.D.R.Civ.P. 60(b) for relief from a summary judgment. The Horrocks are officers of Eight Ball, a Utah trucking company doing business in North Dakota during the relevant time period. A dispute arose over Eight Ball’s allocation of employees between North Dakota and Utah and Eight Ball’s obligation to procure North Dakota workers compensation insurance for its North Dakota employees. In late March and early April 2016, Workforce Safety & Insurance (“WSI”) commenced an action against the defendants by serving them with a summons and complaint to enjoin them from employing individuals in North Dakota and to collect $802,689.84 in unpaid workers compensation insurance premiums, penalties, and interest. The complaint alleged that WSI had issued an August 28, 2015 notice of an administrative decision finding the Horrocks personally liable for unpaid premiums and penalties owed by Eight Ball, that the Horrocks did not request reconsideration nor appeal from that decision, and that the administrative decision was res judicata. WSI filed the pending lawsuit in district court and moved for summary judgment. According to the Horrocks, they did not respond to the summary judgment motion because they thought they had submitted necessary documentation to WSI to resolve the issue. The district court ultimately granted WSI’s motion for summary judgment, awarding WSI $812,702.79 in premiums, penalties, and costs and disbursements and enjoining Eight Ball from engaging in employment in North Dakota. On December 19, 2016, WSI sent the Horrocks a letter, informing them the judgment had been entered against them on December 15, 2016, and requesting payment. The defendants did not appeal the summary judgment. Defendants moved to set aside the summary judgment on grounds of mistake, inadvertence, surprise or excusable neglect. The district court denied the motion, determining the defendants’ disregard and neglect of the legal process was not excusable neglect and failed to establish extraordinary circumstances necessary to set aside the judgment under N.D.R.Civ.P. 60(b). After review of the district court record, the North Dakota Supreme Court concurred and affirmed judgment. View "WSI v. Eight Ball Trucking, Inc., et al." on Justia Law

JRC Construction, LLC, appealed a judgment entered after a jury awarded Larry Pavlicek $217,244.55 in damages against JRC. The jury found JRC breached a contract with Pavlicek relating to construction work performed by JRC. JRC argued the district court erred in denying its motion and renewed motion for judgment as a matter of law because Pavlicek failed to prove he had a contract with JRC. Finding no reversible error, the North Dakota Supreme Court affirmed. View "Pavlicek v. American Steel Systems, Inc., et al." on Justia Law

Robert Nederlander, Sr. (“Robert”) controlled Nederlander of San Francisco Associates (“Nederlander”), a California general partnership. Carole Shorenstein Hays (“Carole”) and her family controlled CSH Theatres L.L.C. (“CSH”), a Delaware LLC. Nederlander and CSH each owned a fifty-percent membership interest in Shorenstein Hays-Nederlander Theatres LLC (“SHN”), a Delaware LLC that operated theaters in San Francisco under SHN’s Plan of Conversion and Operating Agreement of the Company (the “LLC Agreement”). In 2010, CSH Curran LLC, an entity that Carole co-managed, purchased the Curran Theatre in San Francisco (the “Curran”). SHN had been operating under a lease from the Curran’s then-owners, the Lurie Company, since the beginning of the partnership. Carole and her husband, Dr. Jeffrey Hays (“Jeff”) (collectively, the “Hayses”), did not extend that lease with SHN when it expired in 2014. Thereafter, the Hayses began staging productions at the Curran. In February 2014, CSH sued Nederlander in the Delaware Court of Chancery for a declaratory judgment that it had no legal obligation to renew the Curran lease. In September 2018, Nederlander sought a preliminary injunction against CSH and the Hayes to prevent them from staging two theatrical productions at the Curran (the “PI Action”). In the PI Action, Nederlander asserted four counts, but focused its injunction efforts on Count I, which asserted breach of contract claims (based upon the “provisions of Section 7.02 of the LLC Agreement or the contractual fiduciary duties owed to SHN and its members under the LLC Agreement) against all defendants in that action. The trial court denied that motion and shortly thereafter entered a partial final judgment as to Count I of Nederlander’s Complaint, pursuant to Court of Chancery Rule 54(b), to allow for an immediate appeal of the PI Decision. Nederlander argued on appeal that the trial court erred in the Declaratory Judgment Action by refusing to enforce Section 7.02(a) of the LLC Agreement against the Hayses. The Delaware Supreme Court agreed with Nederlander that the Court of Chancery misinterpreted Section 7.02(a) and that the Hayses could not stage competitive productions (not falling within Section 7.02(b)’s exceptions) at the Curran that violated its contractual duty to maximize SHN’s economic success. Accordingly, the Court reversed that aspect of the trial court’s decision. Because Nederlander did not challenge the court’s rulings in the Declaratory Judgment Action as to damages and other forms of relief, the Supreme Court declined to remand that action. Further, in view of the reversal of the trial court’s interpretation of Section 7.02(a) in the Declaratory Judgment Action, the Supreme Court ordered remand of the PI Action for further proceedings. The Court found no error with any other aspect of the trial court’s decisions. View "In Re: Shorenstein Hays-Nederlander Theatres LLC Appeals" on Justia Law