Justia Business Law Opinion Summaries

The IRS issued two “John Doe” summonses to Chase Bank without first obtaining approval in a federal district court as required by Internal Revenue Code section 7609(f), to obtain financial records relating to two limited liability companies. Those LLCs alleged that the IRS’s use of the John Doe summonses to obtain their financial records violated the Right to Financial Privacy Act, 12 U.S.C. 3401-3422. The district court dismissed for lack of subject matter jurisdiction after determining that sovereign immunity barred the LLC’s claims. The Sixth Circuit affirmed, first holding that Congress intended to provide a remedy for violations in the collection of tax, but not in the assessment and determination of tax, so the LLCs do not have a monetary remedy under the Internal Revenue Code. An LLC does not fall under the Privacy Act’s waiver of sovereign immunity and the district court correctly held that it lacked jurisdiction over the claims. View "Hohman v. Eadie" on Justia Law

This mandamus proceeding arose from a dispute about a contract’s forum-selection clause. Trinity Bank loaned money to Apex, a drilling company. Michael Lachner, a part owner of Apex and the relator in this case, signed a personal guaranty of the loan. Apex defaulted on the loan, and Lachner defaulted on the guaranty. Trinity filed an action asserting separate breach of contract claims against Apex (on the loan) and Lachner (on the guaranty). Apex made no appearance, and a default judgment was entered against it. Lachner filed a motion to dismiss the action against him under ORCP 21 A(1), because the action was not filed in San Francisco as required by the forum-selection clause. Neither party disputed the meaning of the forum-selection clause, only whether it should be enforced. The trial court denied the motion, without making any findings or conclusions of law, stating that it “ha[d] discretion in [the] matter.” After review of the clause at issue, the Oregon Supreme Court concluded the clause should be enforced. The Court found none of the circumstances identified in Roberts v. TriQuint Semiconductor, Inc., 364 P3d 328 (2015) (as grounds for invalidating a contractual forum-selection clause) were present here. “Trinity’s objections amount to little more than dissatisfaction with the forum selection clause. The trial court’s factual findings indicate that Oregon might be a marginally more convenient place than California to litigate the case, but that is not the applicable legal standard. . . . As counsel for Trinity conceded at oral argument, it is not unfair or unreasonable to litigate the case in California. For that reason, the trial court did not have discretion to deny Lachner’s ORCP 21A (1) motion to dismiss based on the forum-selection clause: The law required the court to dismiss the action. It was legal error not to do so.” A peremptory writ of mandamus issued. View "Trinity v. Apex Directional Drilling LLC" on Justia Law

Petitioners Mark and Larkin Hammond built and operated several successful restaurants in Lake Lure, North Carolina, and Greenville, South Carolina. The Hammonds hired Respondent Kyle Pertuis to manage the restaurants, and as part of his compensation, Pertuis acquired minority ownership interests in the three restaurants. Pertuis eventually decided to leave the business, and this dispute primarily concerned the percentage and valuation of Pertuis's ownership interests in the three restaurants. Following a bench trial, the trial court found the three corporate entities should have been amalgamated into a "de facto partnership" operating out of Greenville, South Carolina. The trial court further awarded Pertuis a 10% ownership interest in the two North Carolina restaurants, a 7.2% ownership interest in the South Carolina restaurant, and a total of $99,117 in corporate distributions from the restaurants. The trial court further concluded Pertuis was an oppressed minority shareholder, valued each of the three corporations, and ordered a buyout of Pertuis's shares. The court of appeals affirmed. After review, the South Carolina Supreme Court reversed the court of appeals findings as to amalgamation, "de facto partnership," and the award of 7.2% ownership interest in one of the restaurants. The Court affirmed as modified the court of appeals finding that Pertuis was entitled to unpaid shareholder distributions. The Court vacated the court of appeals opinion to the extent it made any findings as to the two North Carolina corporations, and affirmed the balance of the judgment of the court of appeals pursuant to Rule 220, SCACR. View "Pertuis v. Front Roe Restaurants, Inc." on Justia Law

The First Circuit addressed questions that were “intricate, entangled, and in some instances novel” in this case implicating Massachusetts law.The questions included (1) whether a non-majority shareholder who also serves as a director can be deemed a controlling shareholder; (2) what effect, if any, shareholder ratification may have with respect to a self-interested transaction; and (3) whether, in the absence of economic loss, equitable disgorgement can be ordered as a remedy for a breach of fiduciary duty.The First Circuit affirmed both the district court’s multi-million-dollar disgorgement order in favor of the plaintiff class and the jury’s take-nothing verdict in favor of Defendant, holding that the district judge committed no reversible error in handling the issues presented in this case. View "MAZ Partners LP v. Shear" on Justia Law

This appeal involved questions about the insurance coverage available to defendant Honeywell International, Inc. (Honeywell) for thousands of bodily-injury claims premised on exposure to brake and clutch pads (friction products) containing asbestos. The New Jersey Supreme Court granted certification to address two issues: (1) whether the law of New Jersey or Michigan (the headquarters location of Honeywell’s predecessor when the disputed excess insurance policies were issued) should control in the allocation of insurance liability among insurers for nationwide products-liability claims; and (2) whether it was error not to require the policyholder, Honeywell, to contribute in the allocation of insurance liability based on the time after which the relevant coverage became unavailable in the marketplace (that is, since 1987). The Supreme Court determined New Jersey law on the allocation of liability among insurers applied in this matter, and the Court set forth the pertinent choice-of-law principles to resolve this dispute over insurance coverage for numerous products-liability claims. Concerning the second question, on these facts, the Court also affirmed the determination to follow the unavailability exception to the continuous-trigger method of allocation set forth in Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437 (1994). View "Continental Insurance Company v. Honeywell International, Inc." on Justia Law

In this case, the issue presented for the Louisiana Supreme Court’s review centered on whether a City of New Orleans ordinance levying a gallonage tax based on volume upon dealers who handle high alcoholic content beverages was a valid exercise of its authority to levy and collect occupational license taxes within the meaning of La. Const. Art. VI, sec. 28. The trial court declared the ordinance unconstitutional. The Supreme Court found the portion of the ordinance at issue was not an unconstitutional exercise of the City’s taxing authority. Thus, the Court reversed the trial court’s grant of summary judgment in favor of the plaintiffs, and remanded to the trial court for further proceedings. View "Beer Industry League of Louisiana v. City of New Orleans" on Justia Law

Xlear, Inc. and Focus Nutrition, LLC were both in the business of selling sweeteners that used the sugar alcohol xylitol. Xlear filed a complaint raising a trade dress infringement claim under the Lanham Act, a claim under the Utah Truth in Advertising Act (UTIAA), and a claim under the common law for unfair competition. The claims all alleged that Focus Nutrition copied the packaging Xlear used for one of its sweetener products. Focus Nutrition moved to dismiss Xlear’s Lanham Act claim. At a hearing on Focus Nutrition’s motion to dismiss, the district court judge made several comments questioning the validity of Xlear’s Lanham Act claim but, ultimately, denied the motion. Following the hearing, the parties, pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii), stipulated to the dismissal of all claims with prejudice. Under the stipulation, the parties reserved the right to seek attorneys’ fees and Focus Nutrition exercised its right by filing a motion under Federal Rule of Civil Procedure 54 to recover its fees under the Lanham Act and the UTIAA. The district court concluded that Focus Nutrition was a prevailing party under both the Lanham Act and the UTIAA, and that Focus Nutrition was entitled to all of its requested fees. On appeal, Xlear raised five challenges to the district court’s order. The Tenth Circuit Court of Appeals reversed the district court’s award of attorneys’ fees under the Lanham Act because Focus Nutrition was not a prevailing party under federal law. As to the UTIAA, the Court vacated the district court’s award of attorneys’ fees and remanded for further proceedings to permit the district court to analyze the factors governing prevailing party status under Utah law and, if the court concluded Focus Nutrition was a prevailing party under the UTIAA, to determine what portion of the requested fees Focus Nutrition incurred in defense of the UTIAA claim and the reasonableness of the requested fees. View "Xlear v. Focus Nutrition" on Justia Law

The Amex credit card companies use a two-sided transaction platform to serve cardholders and merchants. Unlike traditional markets, two-sided platforms exhibit “indirect network effects,” because the value of the platform to one group depends on how many members of another group participate. Two-sided platforms must take these effects into account before making a change in price on either side, or they risk creating a feedback loop of declining demand. Visa and MasterCard have structural advantages over Amex. Amex focuses on cardholder spending rather than cardholder lending. To encourage cardholder spending, Amex provides better rewards than the other credit-card companies. Amex continually invests in its cardholder rewards program and must charge merchants higher fees than its rivals. To avoid higher fees, merchants sometimes attempt to dissuade cardholders from using Amex cards (steering). Amex places anti-steering provisions in its contracts with merchants.The Supreme Court affirmed the Second Circuit in rejecting claims that Amex violated section 1 of the Sherman Antitrust Act, which prohibits "unreasonable restraints” of trade. Applying the "rule of reason" three-step burden-shifting framework, the Court concluded the plaintiffs did not establish that Amex’s anti-steering provisions have a substantial anticompetitive effect that harms consumers in the relevant market. Evidence of a price increase on one side of a two-sided transaction platform cannot, by itself, demonstrate an anticompetitive exercise of market power; plaintiffs must prove that Amex’s anti-steering provisions increased the cost of credit-card transactions above a competitive level, reduced the number of credit-card transactions, or otherwise stifled competition. They offered no evidence that the price of credit-card transactions was higher than the price one would expect in a competitive market. Amex’s increased merchant fees reflect increases in the value of its services and the cost of its transactions, not an ability to charge above a competitive price. The Court noted that Visa and MasterCard’s merchant fees have continued to increase, even where Amex is not accepted. The market actually experienced expanding output and improved quality. View "Ohio v. American Express Co." on Justia Law

In 2007-2010, the Hargises bought and operated nursing homes. Bobby was the sole owner of corporations that operated the homes (Operating Corporations), which were S corporations. Brenda owned interests in companies that bought and leased the homes to the Operating Corporations (Nursing Home LLCs). The Nursing Home LLCs were partnerships under 26 C.F.R. 301.7701-3(a). All the entities had net operating losses, which the Hargises deducted on their joint tax returns for 2009 and 2010. The Commissioner issued the Hargises a notice of deficiency, disallowing their deduction of most of the nursing home losses, due to the Hargises’ insufficient basis in their companies. The Hargises owed $281,766. The Tax Court ruled for the Commissioner. The Eighth Circuit affirmed. The Tax Court correctly denied Bobby any basis in the indebtedness of the Operating Corporations, finding “no convincing evidence that any of the lenders looked to [Bobby] as the primary obligor on the loans.” The Commissioner properly calculated Brenda’s basis from the Nursing Home LLCs’ tax returns (Schedule K-1). Her deduction of their losses is limited to “the adjusted basis of [her] interest in the partnership.” View "Hargis v. Koskinen" on Justia Law

When Goplin began working at WeConnect, he signed the “AEI Alternative Entertainment Inc. Open Door Policy and Arbitration Program,” which referred to AEI throughout; it never mentioned WeConnect. Goplin brought a collective action under the Fair Labor Standards Act. WeConnect moved to compel arbitration, Fed.R.Civ.P. 12(b)(3), attaching an affidavit from its Director of Human Resources stating, “I am employed by WeConnect, Inc.—formerly known as Alternative Entertainment, Inc. or AEI.” Goplin claimed that WeConnect was not a party to the agreement and could not enforce it. He cited language on WeConnect’s website: WeConnect formed when two privately held companies, Alternative Entertainment, Inc. (AEI) and WeConnect Enterprise Solutions, combined in September 2016… we officially became one company. WeConnect asserted that WeConnect and AEI were two names for the same legal entity, stating: This was a name change, not a merger. The court held that WeConnect did not establish that it was a party to the agreement or otherwise entitled to enforce it. The court rejected subsequently-submitted corporate-form documents and affidavits, stating that new evidence cannot be introduced in a motion for reconsideration unless the movant shows “not only that [the] evidence was newly discovered or unknown to it until after the hearing, but also that it could not with reasonable diligence have discovered and produced such evidence.” The Seventh Circuit affirmed. View "Goplin v. WeConnect, Inc." on Justia Law