Justia Business Law Opinion Summaries

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

A company developed a specialized vehicle-mounted stairway, with design work primarily performed by the founder’s son, who was promised equity in the business but never received it due to the majority owner’s repeated refusals. The son, with his father’s assistance, eventually obtained a patent for the design, which he used as leverage to seek compensation. Negotiations between the parties failed, leading to the father’s removal as company president and the company filing suit against both the father and son. The company alleged breach of fiduciary duty, misappropriation of trade secrets, business conspiracy, unjust enrichment, fraud, and breach of contract, while the son counterclaimed for patent infringement.The United States District Court for the Eastern District of Virginia granted summary judgment to the father and son on all claims except a breach of contract claim against the father and the son’s patent counterclaim. The court found most claims time-barred or unsupported by evidence, and later, the company voluntarily dismissed its remaining claim. The son’s patent was invalidated by a jury. The district court also awarded attorneys’ fees and costs to the father as the prevailing party under the company’s operating agreement.The United States Court of Appeals for the Fourth Circuit reviewed the case de novo and affirmed the district court’s rulings. The appellate court held that the company’s claims were either time-barred under the applicable statutes of limitations or failed on the merits, as there was no evidence the son benefited from the patent or that he had signed a non-disclosure agreement. The court also affirmed the award of attorneys’ fees and costs to the father, finding no error in the district court’s application of Delaware law or its determination of the prevailing party. View "Mission Integrated Technologies, LLC v. Clemente" on Justia Law

Bloom Energy, a company specializing in fuel-cell servers, entered into Managed Services Agreements (MSAs), which are sale-leaseback arrangements involving banks and customers. The company initially classified these MSAs as operating leases, based on its assessment that the lease terms were less than 75% of the servers’ estimated useful lives and that the servers were not “integral equipment.” This classification affected how Bloom Energy reported revenue and liabilities in its financial statements. PricewaterhouseCoopers LLP (PwC) was engaged to audit Bloom Energy’s 2016 and 2017 financial statements, which were prepared by Bloom Energy’s management, and PwC issued an audit opinion stating that the financial statements were fairly presented in accordance with generally accepted accounting principles.After Bloom Energy went public in 2018, it later restated its financial statements, reclassifying certain MSAs as capital leases following a review prompted by PwC’s identification of an accounting issue. This restatement led to a significant drop in Bloom Energy’s stock price. Plaintiffs, consisting of shareholders, filed a class action in the United States District Court for the Northern District of California against Bloom Energy, its officers, directors, underwriters, and later added PwC as a defendant. They alleged violations of § 11 of the Securities Act of 1933, claiming that PwC was liable for material misstatements in the registration statement due to its audit opinion.The United States Court of Appeals for the Ninth Circuit reviewed the district court’s dismissal of the claims against PwC. The Ninth Circuit held that under § 11, an independent accountant is not strictly liable for information in a registration statement or financial statements merely because it certified them. PwC’s audit opinion was a statement of subjective judgment, protected as an opinion under Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, and did not contain actionable misstatements or omissions. The court affirmed the district court’s dismissal of the claims against PwC. View "HUNT V. PRICEWATERHOUSECOOPERS LLP" on Justia Law

In this case, the plaintiff bank sought to foreclose on a residential property in Vermont after the defendant defaulted on a $365,000 loan originally issued by Countrywide Home Loans, Inc. The mortgage was assigned to the plaintiff, and the bank alleged it was the holder of the note. However, the copy of the note attached to the complaint was made out to the original lender and lacked any indorsement. Over the years, the case was delayed by mediation, bankruptcy, and various motions. At trial, the plaintiff produced the original note with an undated indorsement in blank, but could not establish when it became the holder of the note.The Vermont Superior Court, Windsor Unit, Civil Division, denied the plaintiff’s initial summary judgment motion, finding that the plaintiff had not established standing under the Uniform Commercial Code. A later summary judgment was vacated due to procedural errors. After a hearing, the court found the plaintiff was currently a holder of the note and that the defendant had defaulted, but concluded that the plaintiff failed to prove it had the right to enforce the note at the time the complaint was filed, as required by U.S. Bank National Ass’n v. Kimball. Judgment was entered for the defendant, and the plaintiff’s post-judgment motion to designate the judgment as without prejudice was denied.On appeal, the Vermont Supreme Court affirmed the lower court’s decision. The Court held that a foreclosure plaintiff must demonstrate standing by showing it had the right to enforce the note at the time the complaint was filed, declining to overrule or limit Kimball. The Court also declined to address whether the judgment should be designated as without prejudice, leaving preclusion consequences to future proceedings. View "The Bank of New York Mellon v. Quinn" on Justia Law