Justia Business Law Opinion Summaries

Former restaurant employees sued their former employer, Koji’s Japan, Inc. (Koji’s), Koji’s president, sole shareholder and director Arthur Parent, Jr. (Parent), and A.J. Parent Company, Inc., otherwise known as America’s Printer (America’s Printer), of which Parent was also the president, sole shareholder and director. The plaintiff employees alleged wage and hour claims under the federal Labor Code and the Fair Labor Standards Act of 1938 (FLSA), claims under the California unfair competition law (Bus. & Prof. Code, sec. 17200), and a claim under the California Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, sec. 2699 et seq.). Considering this appeal as a petition for a writ of mandate, the Court of Appeal granted writ relief by holding: (1) the trial court erred by granting the motion to certify a class as to plaintiffs’ claims against only Koji’s because the court applied improper criteria in determining Parent’s potential liability as a joint employer on a class-wide basis; (2) the trial court prejudicially erred by denying plaintiffs’ revised motion to compel further responses to a set of document requests, and also by sanctioning plaintiffs’ counsel; (3) because the Court directed the trial court to vacate its order denying the revised motion to compel further responses to discovery on alter ego issues, the Court directed the trial court to also vacate its findings that Parent and America’s Printer were not Koji’s alter egos; and (4) although the trial court’s statement of decision correctly cited the controlling case law in this matter, the statement of decision misapplied the law as set by that case. View "Turman v. Superior Court" on Justia Law

Hyatt and Shen Zhen entered into an agreement providing that Shen Zhen would renovate a Los Angeles hotel and operate it using Hyatt’s business methods and trademarks. Two years later Hyatt declared that Shen Zhen was in breach. An arbitrator concluded that Shen Zhen owes Hyatt $7.7 million in damages plus$1.3 million in attorneys’ fees and costs. The Seventh Circuit affirmed the district court’s order of enforcement, upholding the arbitrator’s refusal to issue a subpoena to Cadwalader, who represented Shen Zhen during the contract negotiations. The dispute arose two years after Cadwalader stopped working for Shen Zhen. The contract has an integration clause that forecloses resort to the negotiating history as an interpretive tool. The arbitrator also declined to disqualify Hyatt’s law firm, which Cadwalader joined about three years after the contract was signed, finding that the firm’s ethics screen ensured that no confidential information would reach Hyatt's lawyers. The court also rejected an argument that the award disregarded federal and state franchise law and should be set aside under 9 U.S.C. 10(a)(4), which covers situations in which “the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” View "Hyatt Franchising, L.L.C. v. Shen Zhen New World I, LLC" on Justia Law

Bio‐Systems produced biodegradation products that use bacteria to break down waste. Customers often required certificates of analysis, so Bio‐Systems counted the bacteria in a product before its sale. Betco purchased Bio‐Systems, after visiting Bio‐Systems’s sites, speaking with personnel, and examining financial information. Betco paid Peacock $5 million and placed $500,000 in escrow, to be released two years after closing if Belco had not identified any problems. Peacock continued to run the plant. Betco instructed him to focus on sales and profits. Betco knew before closing that the bacteria yields were inconsistent at the plant; it learned within a year of closing that some products were being shipped with below‐specification bacteria counts. Betco nonetheless released the escrow early in exchange for a discount. Betco subsequently discovered that certificates of analysis were being falsified. Betco sued Peacock. The court dismissed negligent misrepresentation and breach of contract claims as time‐barred by the Agreement, and found that Betco failed to prove violation of the duty of good faith and hadn’t shown any cognizable injury from the alleged violation. The Seventh Circuit affirmed rejection of all of Betco’s claims. When Betco purchased Bio‐Systems, it expected profitability and not to face claims for shipping products with intentionally falsified certificates; it received that. Betco did not expect that it was purchasing flawless processes. Under Wisconsin law, the inquiry is not whether Betco paid the appropriate price but whether Betco received the benefits that it expected. View "Betco Corp., Ltd. v. Peacock" on Justia Law

Thirteen Illinois municipalities claimed that the online travel agencies (OTAs), including Expedia, Priceline, and Travelocity, have withheld money owed to them under their local hotel tax ordinances. The OTAs operate their online travel websites under the “merchant model”; customers pay an OTA directly to reserve rooms at hotels the OTA has contracted with. The participating hotels set a room rental rate. The OTA charges the customer a price that includes that rate, the estimated tax owed to the municipality, and additional charges for the OTA’s services. After the customer’s stay, the hotel invoices the OTA for the room rate and taxes and remits the taxes collected to the municipality. Contracts between hotels and the OTAs confirm that the OTAs do not actually buy, and never acquire the right to enter or grant possession of, hotel rooms. The municipalities claim that OTAs do not remit taxes on the full price that customers pay. The Seventh Circuit affirmed summary judgment in favor of the OTAs. None of the municipal ordinances place a duty on the OTAs to collect or remit the taxes, so the municipalities have no recourse against the OTAs View "Village of Bedford Park v. Expedia, Inc." on Justia Law

Laboratory Specialists International, Inc. (LSI) filed a complaint in Orange County Superior Court alleging causes of action against Shimadzu Scientific Instruments, Inc. (Shimadzu) for breach of contract, conversion, breach of the implied covenant of good faith and fair dealing, intentional interference with contractual relations, and intentional and negligent interference with prospective economic relations. LSI appealed when the trial court dismissed its lawsuit against Shimadzu under the forum selection clause in the parties’ contract. LSI contended Shimadzu erred by requesting a dismissal in its demurrer dismissal based on the forum selection clause, rather than by a separate motion, and that the trial court erred by granting Shimadzu leave to recast its request for dismissal in a separate motion. In the alternative, LSI argued the court erred by: (1) dismissing LSI’s tort claims, which LSI argued did not arise out of or “pertain[]” to the parties’ contract; (2) finding the forum selection clause mandated Maryland as the proper fourm, rather than conducting an analysis under discretionary forum non conveniens factors; and (3) dismissing rather than staying LSI’s lawsuit. As we explain, these contentions are without merit, and we therefore affirm the court’s dismissal order. View "Laboratory Specialists International v. Shimadzu Scientific etc." on Justia Law

General Motors provides sales incentives to dealers who sell cars to GM employees, retirees, and their family members at a discounted rate. The dealer must collect a signed agreement from the purchaser that establishes his eligibility for the program. In 2014, GM audited one of its Ohio dealers, Sims, and discovered transactions in which Sims had failed to collect the agreement from purchasers within the timeline set by GM in a 2012 dealership bulletin. GM debited Sims’ account $47,493.28 for improper incentive payments. Sims is located near a large GM plant in Lordstown, and the Purchase Program accounts for 80% to 90% of its sales. Sims filed suit alleging breach of contract and violations of the Ohio Dealer Act. The district court granted GM summary judgment. The Sixth Circuit affirmed. The parties’ dealership arrangement permitted the debit and a timely filed Consumer Dealer Agreement constitutes “material documentation” under Section 4517.59(A)(20)(a) of the Ohio Dealer Act. View "Sims Buick-GMC Truck, Inc. v. General Motors, LLC" on Justia Law

Rule 12A, contained in Order 15 of the Cayman Islands Grand Court Rules 1995, is procedural and therefore does not apply where, as here, a plaintiff seeks to litigate his derivative claims in New York.Plaintiff owned ordinary shares in Scottish Re Group, Limited, a Cayman Islands company formerly engaged in the business of reinsurance. Plaintiff asserted both direct and derivative causes of action against Scottish Re and others. The only claims relevant to this appeal were Plaintiff’s derivative claims. Supreme Court dismissed Plaintiff’s derivative causes of action, ruling that, under Cayman Islands law, Plaintiff had not established standing because he did not seek leave of court to commence a derivative action under Rule 12A of the Rules of the Grand Court of the Cayman Islands. The Appellate Division affirmed based on Plaintiff’s noncompliance with Rule 12A, concluding that the rule applied because it was substantive rather than procedural. The Court of Appeals reversed, holding that Plaintiff’s derivative claims should not have been dismissed on the ground that he failed to comply with Rule 12A where Rule 12A is a procedural rule that does not apply in New York courts. View "Davis v. Scottish Re Group Ltd." on Justia Law

Objector-Appellant Dale Hefner appeals from the district court’s denial of his motion for settlement-related discovery, approval of the settlement agreement, and order regarding attorneys’ fees. This case concerns the settlement agreement and attorneys’ fees related to two separate shareholder derivative suits on behalf of SandRidge Energy Inc. (“SandRidge”) against its directors. The first of those actions was filed in federal district court in January 2013. The federal derivative suit alleged self-dealing, usurpation of corporate opportunities, and misappropriation by Tom Ward, SandRidge’s founding CEO, and entities affiliated with him. Hefner filed the second derivative suit was filed in Oklahoma state court in 2013. The director-defendants moved the state court to stay the action pending a resolution in the federal case, or in the alternative to dismiss the suit entirely. Hefner objected, and the state court stayed the action but denied the motion to dismiss. In 2014, the state court entered a stipulated and agreed to order granting SandRidge’s motion to stay. Then in 2015, the federal district court granted a preliminary approval of a partial settlement in the federal suit. Hefner (1) filed a contingent motion for attorneys’ fees and reimbursement of expenses, (2) objected to the settlement, and (3) requested additional settlement-related discovery. The district court denied Hefner’s motion for additional discovery and, after a hearing on the other matters, entered a final order and judgment approving the proposed partial settlement and denying the request for attorneys’ fees. While the appeal was pending before the Tenth Circuit, SandRidge filed for Chapter 11 bankruptcy. SandRidge gave notice of the bankruptcy court’s approval of the company’s plan of reorganization and filed a contemporaneous motion to dismiss the appeal as moot, contending that because company stock was cancelled as part of the bankruptcy, Hefner did not have standing to pursue a shareholder derivative claim; the relevant derivative claims were released and discharged as part of the reorganization, and the right to pursue derivative litigation vested in reorganized SandRidge. The Tenth Circuit agreed that Hefner's claims were moot, and finding no other reversible error, it appealed. View "Elliot v. Ward" on Justia Law

In this appeal, the New Jersey Supreme Court considered whether an attorney’s pledge of anticipated attorney’s fees could be considered an account receivable and secured under Article 9 of the Uniform Commercial Code (UCC), and whether the lender here complied with the requirements of the UCC to perfect its security interest. Plaintiff John Giovanni Granata retained Diane Acciavatti to bring a legal malpractice complaint against defendants Edward Broderick Jr., and Broderick, Newmark, & Grather. Acciavatti accepted a $10,000 retainer and agreed to a contingent fee arrangement. After a jury trial, Granata was awarded a judgment of $1,597,193, and the trial judge granted Acciavatti’s motions for fees, costs, and pre-judgment interest. Defendants appealed, and Granata cross-appealed. Acciavatti had an oral agreement with Granata to represent him at $350 per hour and told him she would seek counsel fees from defendants after the appeal. While the appeal was pending, Acciavatti withdrew from the practice of law. Dominic Caruso was appointed attorney-trustee for Acciavatti’s practice, and the firm of Roper & Twardowsky, LLC (the Roper firm), filed a substitution of counsel form for Acciavatti. The Appellate Division reversed and remanded for a new trial. Following a two-day mediation, the case settled for $840,000. Three of Acciavatti’s creditors then claimed liens upon any legal fees owed to her from the case. The appellate panel considered whether Acciavatti possessed an interest in her anticipated legal fees and whether one of her creditor's UCC filing granted it a perfected interest in those fees. The panel reasoned that, “[i]f both questions [we]re answered in the affirmative, [the creditor], as a perfected secured creditor, would enjoy priority over [the other creditors], who are subsequent lien creditors seeking to levy on the same collateral.” The panel expressed agreement with cited decisions and held “that, under certain circumstances, an attorney’s pledge of anticipated counsel fees can be considered an account receivable and secured under Article 9.” The panel observed that “[the appealing creditor] met the requirements of N.J.S.A. 12A:9-203 for its security interest to attach to Acciavatti’s counsel fees." Finding no reversible error in that judgment, the Supreme Court affirmed. View "Granata v.Broderick" on Justia Law

Jesse Craig appealed a judgment awarding TJ Haugrud $120,000 plus interest on Haugrud's breach of contract claim against Craig, dismissing Craig's counterclaims against Haugrud, and sanctioning Craig's attorney $5,000. Haugrud and Craig formed Acquisition, LLC, for the purpose of developing, owning and managing real estate, and each were 50 percent owners of the limited liability company. In October 2016, Haugrud and Craig entered into a written agreement for Craig to purchase Haugrud's interest in the company for $130,000 payable in two installments. Craig paid $10,000 by November 1, 2016 for the first installment, but did not pay the $120,000 second installment which was due by December 1, 2016. Haugrud sued Craig for breach of contract seeking the unpaid installment of $120,000. Craig filed a counterclaim against Haugrud alleging actual fraud, constructive fraud, deceit, unintentional misrepresentation, and civil conspiracy in connection with the parties' business dealings, including transactions between their respective business entities that were not made parties to the lawsuit. The district court granted summary judgment on Haugrud's breach of contract claim because Craig "conceded" he failed to make the second installment payment required by the contract. The court also dismissed Craig's counterclaims for failure to state claims upon which relief can be granted because Craig "treats [Haugrud] as an individual with respect of his sole interest" in the limited liability companies, Craig "made no allegation to pierce the corporate veil," and Craig "treats his own interest" in the limited liability companies "as giving rise to personal claims" which belong to the separate entities. The court further found Craig's "attempt to make [Haugrud] responsible as a shareholder of a corporation, the obligations of the corporation, is not grounded in law" and awarded Haugrud $5,000 in attorney fees as a sanction assessed against Craig's counsel. After review, the North Dakota Supreme Court affirmed the district court's grant of summary judgment on Haugrud's breach of contract claim. The Court reversed dismissal of Craig's counterclaims on the pleadings and the sanction, and remanded for further proceedings. View "Haugrud v. Craig" on Justia Law