Justia Business Law Opinion Summaries

This case involves a dispute between Blackrock Enterprises, LLC and BB Land, LLC and JB Exploration 1, LLC over a Lease Acquisition Agreement (LAA). Both parties claimed the other had breached the agreement and sought declaratory relief regarding their respective rights and obligations. The trial was bifurcated into two phases. In the first phase, a jury found that both parties had materially breached the LAA, but that Blackrock had committed the first material breach. As a result, the business court concluded that Blackrock could not recover for any subsequent breach committed by Jay-Bee. In the second phase, the business court determined that the parties were engaged in a de facto mining partnership and ordered Blackrock dissociated from the partnership. The court also valued Blackrock’s partnership interest at zero and ordered it to quit-claim its interests in certain leases to Jay-Bee. Blackrock appealed, arguing that the business court committed multiple errors in both phases of the proceedings.The Supreme Court of Appeals of West Virginia found that the business court erred in its construction of the first material breach doctrine and by granting judgment for Jay-Bee on the basis of clearly erroneous findings “deemed” made by operation of West Virginia Rule of Civil Procedure 49(a). The court reversed the final judgment and remanded for a new trial and further proceedings. The court also vacated that portion of the final judgment order finding the parties engaged in a mining partnership. View "Blackrock Enterprises, LLC v. BB Land, LLC" on Justia Law

This case involves a dispute over a merger between Parametric Sound Corporation and VITB Holdings, Inc. (VITBH). A group of shareholders, who later formed PAMTP, LLC, opted out of a class action settlement related to the merger and filed a separate lawsuit. They alleged that the merger diluted their equity interests and that Kenneth Potashner, a member of Parametric's board, had breached his fiduciary duties by misleading shareholders about the financial outlook of the merger. The district court granted judgment to the defendants, finding that PAMTP had failed to plead a direct claim.The district court's decision was based on the Nevada Supreme Court's ruling in a previous related case, Parametric I, which held that the shareholders' claims should be dismissed for failure to plead a direct claim. However, the court granted the shareholders leave to replead certain claims that may have been direct under a Delaware case, Gentile v. Rossette. PAMTP's complaint in the present case was based on this guidance.The Nevada Supreme Court affirmed the district court's decision, finding that PAMTP had indeed failed to plead a direct claim. The court noted that the Delaware Supreme Court had since overruled Gentile, holding that most equity expropriation claims are exclusively derivative. The court also found that PAMTP had not satisfied the "direct harm test" adopted in Parametric I.The court also addressed the district court's award of costs and attorney fees to the defendants. It affirmed the award of costs but reversed the award of pre-complaint costs, finding that the district court had abused its discretion. The court also reversed the district court's denial of attorney fees to the defendants, finding that they were entitled to fees under Nevada Rule of Civil Procedure 68. The case was remanded for the district court to determine the amount of fees to which the defendants were entitled. View "In re Parametric Sound Corp." on Justia Law

Kevin Erikson, an employee of Wilbur-Ellis Company, LLC, left his job to work for a competitor, J.R. Simplot Company. Erikson had signed an employment agreement with Wilbur-Ellis in 2015, which included a non-competition and non-solicitation provision, preventing him from working with or soliciting from Wilbur-Ellis's customers or employees within a 100-mile radius of McCook County for two years after his employment was terminated. The agreement was set to terminate on March 31, 2019. Nearly four years after the termination of the agreement, Erikson resigned from Wilbur-Ellis and began working for Simplot, a competitor located in the restricted region.Wilbur-Ellis filed a lawsuit against Erikson, arguing that he had breached the agreement by violating the non-competition and non-solicitation provisions. The district court granted Wilbur-Ellis's motion for a preliminary injunction, holding that Wilbur-Ellis was likely to succeed on the merits of its breach of contract claim against Erikson. The court concluded that the non-competition and non-solicitation provisions survived the termination of the agreement and remained enforceable against Erikson at the time of his resignation in 2023.On appeal to the United States Court of Appeals for the Eighth Circuit, Erikson argued that the non-competition and non-solicitation provisions were not enforceable against him because the agreement terminated on March 31, 2019, and the provisions did not survive the termination date. The appellate court agreed with Erikson, stating that the provisions did not contain express language sufficient to extend their application beyond the agreement's termination date. Therefore, the provisions expired at the same time as the agreement. The court reversed the district court's decision and vacated the preliminary injunction. View "Wilbur-Ellis Company v. Erikson" on Justia Law

The case revolves around the valuation of shares for estate tax purposes following the death of a shareholder. Michael and Thomas Connelly were the sole shareholders of Crown C Supply, a building supply corporation. They had an agreement that if either brother died, the surviving brother could purchase the deceased's shares. If he declined, the corporation would be required to redeem the shares. To ensure the corporation had enough money for this, it obtained $3.5 million in life insurance on each brother. When Michael died, Thomas chose not to purchase Michael's shares, triggering Crown's obligation to do so. The value of Michael's shares was agreed to be $3 million, which was paid to Michael's estate. The Internal Revenue Service (IRS) audited the return and disagreed with the valuation, insisting that the corporation's redemption obligation did not offset the life-insurance proceeds. The IRS assessed the corporation's total value as $6.86 million and calculated the value of Michael's shares as $5.3 million. Based on this higher valuation, the IRS determined that the estate owed an additional $889,914 in taxes.The District Court granted summary judgment to the Government, holding that the $3 million in life-insurance proceeds must be counted in Crown’s valuation. The Eighth Circuit affirmed this decision.The Supreme Court of the United States affirmed the lower courts' decisions. The Court held that a corporation’s contractual obligation to redeem shares is not necessarily a liability that reduces a corporation’s value for purposes of the federal estate tax. The Court reasoned that a fair-market-value redemption has no effect on any shareholder’s economic interest, and thus, no hypothetical buyer purchasing Michael’s shares would have treated Crown’s obligation to redeem Michael’s shares at fair market value as a factor that reduced the value of those shares. The Court concluded that Crown’s promise to redeem Michael’s shares at fair market value did not reduce the value of those shares. View "Connelly v. United States" on Justia Law

The case involves Truck Insurance Exchange (Truck), the primary insurer for companies that manufactured and sold products containing asbestos. Two of these companies, Kaiser Gypsum Co. and Hanson Permanente Cement (Debtors), filed for Chapter 11 bankruptcy after facing thousands of asbestos-related lawsuits. As part of the bankruptcy process, the Debtors proposed a reorganization plan that created an Asbestos Personal Injury Trust (Trust) to handle all present and future asbestos-related claims. Truck, contractually obligated to defend each covered asbestos personal injury claim and to indemnify the Debtors for up to $500,000 per claim, opposed the Plan, arguing that it exposed them to millions of dollars in fraudulent claims due to different disclosure requirements for insured and uninsured claims.The District Court confirmed the Plan, concluding that Truck had limited standing to object to the Plan because it was “insurance neutral,” meaning it did not increase Truck’s prepetition obligations or impair its contractual rights under its insurance policies. The Fourth Circuit affirmed this decision, agreeing that Truck was not a “party in interest” under §1109(b) of the Bankruptcy Code because the plan was “insurance neutral.”The Supreme Court of the United States reversed the Fourth Circuit's decision, holding that an insurer with financial responsibility for bankruptcy claims is a “party in interest” under §1109(b) of the Bankruptcy Code and may raise and appear and be heard on any issue in a Chapter 11 case. The Court reasoned that §1109(b)’s text, context, and history confirm that an insurer such as Truck with financial responsibility for a bankruptcy claim is a “party in interest” because it may be directly and adversely affected by the reorganization plan. The Court also rejected the “insurance neutrality” doctrine, stating that it conflates the merits of an objection with the threshold party in interest inquiry. The case was remanded for further proceedings consistent with the Supreme Court's opinion. View "Truck Insurance Exchange v. Kaiser Gypsum Co." on Justia Law

The case involves the South Carolina Department of Parks, Recreation and Tourism (SCPRT) and Google LLC. The State of South Carolina, along with several other states, sued Google for violations of federal and state antitrust laws. Google subpoenaed SCPRT for discovery pertinent to its defense. SCPRT refused to comply, asserting Eleventh Amendment immunity and moved to quash the subpoena.The district court denied SCPRT's motion, holding that any Eleventh Amendment immunity that SCPRT may have otherwise been entitled to assert was waived when the State, through its attorney general, voluntarily joined the federal lawsuit against Google. SCPRT appealed this decision.The United States Court of Appeals for the Fourth Circuit affirmed the district court's decision. The court found that by joining the lawsuit against Google, the State voluntarily invoked the jurisdiction of a federal court, thereby effecting a waiver of its Eleventh Amendment immunity as to all matters arising in that suit. And because SCPRT’s immunity derives solely from that of the State, South Carolina’s waiver of Eleventh Amendment immunity equally effected a waiver of SCPRT’s immunity. The district court, therefore, properly denied SCPRT’s motion to quash. View "SC Dept of Parks, Recreation and Tourism v. Google LLC" on Justia Law

The case involves a challenge to a rule adopted by the Securities and Exchange Commission (SEC) aimed at enhancing the regulation of private fund advisers. The rule was designed to protect investors who invest in private funds and to prevent fraud, deception, or manipulation by the investment advisers to those funds. The petitioners, a group of associations representing private fund managers, challenged the rule, arguing that the SEC exceeded its statutory authority in adopting it.The case was heard in the United States Court of Appeals for the Fifth Circuit. The petitioners argued that the SEC had overstepped its authority under the Investment Advisers Act of 1940 and the Dodd-Frank Act. They contended that the rule imposed requirements that were not authorized by these statutes and that the SEC had failed to adequately consider the rule's impact on efficiency, competition, and capital formation.The SEC, on the other hand, argued that it had the authority to adopt the rule under sections 206(4) and 211(h) of the Advisers Act. It contended that these provisions authorized it to define and prescribe means to prevent fraudulent, deceptive, or manipulative acts by investment advisers.The Fifth Circuit sided with the petitioners, holding that the SEC had exceeded its statutory authority in adopting the rule. The court found that the rule was not authorized by the relevant provisions of the Advisers Act and that the SEC had failed to establish a close nexus between the rule and the prevention of fraud or deception. As a result, the court vacated the rule. View "NA of Private Fund Managers v. SEC" on Justia Law

A class of individuals and businesses in Northern California, who paid health insurance premiums to certain health plans, sued Sutter Health, a healthcare system operator in the region. They alleged that Sutter abused its market power to charge supracompetitive rates to these health plans, which were then passed on to the class in the form of higher premiums. The case went to trial on claims under California’s Cartwright Act for tying and unreasonable course of conduct. The jury returned a verdict in favor of Sutter.The plaintiffs appealed, arguing that the district court erred by failing to instruct the jury to consider Sutter’s anticompetitive purpose and by excluding evidence of Sutter’s conduct before 2006. The United States Court of Appeals for the Ninth Circuit agreed with the plaintiffs. It held that the district court contravened California law by removing “purpose” from the jury instructions, and that the legal error was not harmless. The court also held that the district court abused its discretion under Federal Rule of Evidence 403 in excluding as minimally relevant all evidence of Sutter’s conduct before 2006. The court concluded that these errors were prejudicial and reversed the district court’s judgment, remanding the case for a new trial. View "SIDIBE V. SUTTER HEALTH" on Justia Law

The case revolves around Lee Hofmann, who controlled multiple businesses, including Games Management and International Supply. Games Management borrowed approximately $2.7 million from Citizens Equity First Credit Union (the Lender), with Hofmann guaranteeing payment. When Games Management defaulted and Hofmann failed to honor his guarantee, the Lender obtained a judgment against Hofmann. In 2013, Hofmann arranged for International Supply to pay the Lender $1.72 million. By 2015, International Supply was in bankruptcy, and a trustee was appointed to distribute its assets to creditors.The bankruptcy court held a trial, during which expert witnesses disagreed on whether International Supply was solvent in 2013. The Trustee's expert testified that it was insolvent under two of three methods of assessing solvency, while the Lender's expert testified that it was solvent under all three methods. The bankruptcy judge concluded that International Supply was insolvent in August 2013 and directed the Lender to pay $1.72 million plus interest to the Trustee. The district court affirmed this decision.The case was then brought before the United States Court of Appeals for the Seventh Circuit. The Lender argued that the only legally permissible approach to defining solvency is the balance-sheet test. However, the court disagreed, stating that the Illinois legislation does not support this view. The court also noted that the Lender had not previously argued for the balance-sheet test to be the exclusive approach, which constituted a forfeiture. The court concluded that the bankruptcy judge was entitled to use multiple methods to determine solvency. The court affirmed the district court's decision, requiring the Lender to pay $1.72 million plus interest to the Trustee. View "Stone v. Citizens Equity First Credit Union" on Justia Law

AsymaDesign, LLC, a company that operated a virtual-reality ride in a shopping mall, entered into a lease with CBL & Associates Management, Inc. Following complaints about noise from the ride, CBL relocated it within the mall, as permitted by the lease. The new location proved unprofitable, leading AsymaDesign to stop paying rent, resulting in eviction and subsequent dissolution under the Illinois Limited Liability Company Act. Nearly four years later, George Asimah, the former owner of the LLC, filed a lawsuit against CBL under 42 U.S.C. §1981 and state contract law, alleging racial discrimination when CBL did not allow the LLC extra time to pay its rent.The district court dismissed the suit on the grounds that Asimah was not the real party in interest, as the lease was held by AsymaDesign, not Asimah personally. An amended complaint added AsymaDesign as an additional plaintiff, but this was also dismissed as untimely. The court ruled that although Illinois law allows a dissolved LLC a "reasonable time" to wind up its business, AsymaDesign had not begun to litigate until almost five years after its dissolution, exceeding the benchmark allowed by Illinois law.In the United States Court of Appeals for the Seventh Circuit, AsymaDesign filed a notice of appeal. However, the notice was signed only by George Asimah, who is not a lawyer and therefore cannot represent AsymaDesign or anyone other than himself. The court ruled that only a member of the court's bar (or a lawyer admitted pro hac vice) can represent another person or entity in litigation. AsymaDesign's sole argument was that anyone may represent an Illinois corporation in federal court, which the court dismissed as misguided. Consequently, the appeal was dismissed. View "Asimah v. CBL & Associates Management, Inc." on Justia Law