Justia Business Law Opinion Summaries

Fire Protection Service, Inc. (FPS), a Texas business, served as a non-exclusive dealer for Survitec Survival Products, Inc., which manufactures and distributes marine safety products, including life rafts. These life rafts, each valued at over $15,000 and capable of accommodating up to 30 people, are required by federal law and international treaties to be installed on various types of navigable vessels used in industries such as offshore oil and gas, commercial fishing, and maritime shipping. In August 2017, Survitec terminated its dealership agreement with FPS without citing cause and did not repurchase FPS’s unsold inventory.FPS filed suit in the United States District Court for the Southern District of Texas, alleging that Survitec’s actions violated the Texas Fair Practices of Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act (“Dealer Act”). After a bench trial, the district court granted Survitec’s Rule 52(c) motion, ruling that the life rafts did not qualify as “Equipment” under the Act, and therefore the Act did not apply to the parties’ agreement.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the district court’s legal conclusions de novo. The Fifth Circuit held that Survitec’s life rafts are “Equipment” under the Dealer Act because they are used “in connection with” commercial activities covered by the Act, including construction, maintenance, mining (which encompasses oil and gas extraction), and industrial activities. The court found that the Act’s language and legislative intent support a broad interpretation, and that the life rafts meet the statutory definition. Accordingly, the Fifth Circuit reversed the district court’s judgment and remanded the case for further proceedings consistent with its opinion. View "Fire Protection v. Survitec Survival" on Justia Law

Two individuals, along with other plaintiffs, filed suit under Section 7 of the Clayton Act to block a proposed merger between two airlines. After their case was filed, the U.S. Department of Justice, joined by several states and the District of Columbia, brought a separate action challenging the same merger. Both cases were assigned to the same judge in the U.S. District Court for the District of Massachusetts, but were not consolidated. The district court found that only two of the original plaintiffs had standing, dismissing the others. The plaintiffs’ request to consolidate their case with the DOJ’s was denied.The DOJ case proceeded to trial first, resulting in a bench trial judgment that the merger violated the Clayton Act, and the court permanently enjoined the merger. The airlines appealed but later abandoned the merger and dismissed their appeal. As a result, the district court dismissed the remaining plaintiffs’ case as moot, since the relief they sought had already been granted in the DOJ case. The dismissed plaintiffs then moved for attorneys’ fees and costs, arguing they were prevailing parties under Section 16 of the Clayton Act because their efforts contributed to the outcome.The United States Court of Appeals for the First Circuit reviewed whether the plaintiffs qualified as prevailing parties eligible for attorneys’ fees. The court held that, under the standard set by Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources, a party must obtain a judicially sanctioned change in the legal relationship of the parties, such as a judgment on the merits or a consent decree. Because the plaintiffs’ case was dismissed as moot without a judgment on the merits, and they were not beneficiaries of the injunction in the DOJ case, the court concluded they were not prevailing parties. The First Circuit affirmed the district court’s denial of attorneys’ fees and costs. View "Garavanian v. JetBlue Airways Corp." on Justia Law

This case arose from a complex series of shareholder derivative actions involving a mineral rights holding company. The litigation began in March 2014, alleging self-dealing by the company’s corporate counsel and majority shareholder. Over the years, multiple complaints and counterclaims were filed, and the cases were consolidated. The original defendant, Paul, was dismissed from the case in 2016 but was later named as a counterdefendant in an amended counterclaim filed in 2020, after control of the company shifted. During Paul’s absence from the litigation, the remaining parties agreed to waive the five-year rule for bringing a case to trial under NRCP 41(e)(2)(B).The Second Judicial District Court, after considering Paul’s 2024 motion to dismiss for lack of prosecution under NRCP 41(e)(2)(B), denied the motion. The district court reasoned that the 2020 amended counterclaim constituted a new action, thereby restarting the five-year period, and that the parties’ earlier waiver of the five-year rule applied to Paul as well.The Supreme Court of Nevada reviewed the case on a petition for a writ of mandamus. The court held that the five-year period for bringing an action to trial under NRCP 41(e)(2)(B) begins with the filing of the initial complaint, regardless of subsequent procedural developments. The court further clarified that a waiver of the five-year rule by some parties does not bind parties who did not join in the waiver. The court also determined that the amended counterclaim did not constitute a new action for purposes of the rule. As a result, the Supreme Court of Nevada granted the petition and directed the district court to dismiss the action against Paul, with the district court to determine whether the dismissal should be with or without prejudice. View "Paul v. District Court" on Justia Law

A waste hauling company operating in Kansas City brought suit against a mobile waste compaction business and its franchisor. The waste hauler owns containers that are leased to customers, who sometimes contract separately with the compaction company to compress waste inside those containers. The hauler alleged that the compaction company’s activities damaged its containers and interfered with its business relationships. The hauler sought various forms of relief, including damages, injunctive and declaratory relief, and nominal damages, but ultimately disavowed any claim for actual monetary damages, citing a lack of evidence to support such damages.The United States District Court for the Western District of Missouri denied the hauler’s request for a temporary restraining order, finding no irreparable harm. During discovery, the hauler admitted it could not identify or quantify any actual damages and stipulated it was not seeking damages outside Kansas City. The district court granted the compaction company’s motion to strike the hauler’s jury demand, holding that the hauler had not presented evidence of compensatory damages, that nominal damages were unavailable under Missouri law for the claims asserted, and that the remaining claims were equitable in nature. After a bench trial, the district court entered judgment for the compaction company and its franchisor, finding the hauler failed to prove essential elements of its claims, including actual damages and direct benefit conferred for unjust enrichment.On appeal, the United States Court of Appeals for the Eighth Circuit affirmed. The court held that the hauler was not entitled to a jury trial under the Seventh Amendment because it failed to present evidence of compensatory damages and nominal damages were not available for its claims under Missouri law. The court also affirmed judgment for the compaction company on the trespass to chattels and unjust enrichment claims, finding the hauler failed to prove dispossession, damages, or a direct benefit conferred. View "Allied Services v. Smash My Trash, LLC" on Justia Law

A closely held Kentucky corporation, operated by members of the Tarter family, experienced a transfer of shares from the third generation (David, Donald, and Joy) to their children in December 2012. Despite this transfer, the corporation failed to observe corporate formalities such as holding annual shareholder or board meetings, leaving the composition of the board unclear. This ambiguity became significant when three shareholders sought to sue a family member, Josh Tarter, for alleged misconduct during his tenure as president. The plaintiffs attempted to have the board authorize the corporation to sue, and, alternatively, brought a derivative action on behalf of the corporation.The United States District Court for the Eastern District of Kentucky initially dismissed the complaint, finding the plaintiffs lacked standing for direct claims and failed to make a demand or show futility for derivative claims. After the plaintiffs attempted to cure these defects by calling a special board meeting and authorizing the suit, the district court first allowed the claims to proceed, then later granted summary judgment to the defendants, holding that the board vote was invalid because the third-generation members had resigned by transferring their shares. Upon reconsideration, the court vacillated, at one point accepting a theory that Anna Lou was the sole board member, but ultimately reinstated summary judgment for the defendants, reasoning that the plaintiffs had not properly pleaded this theory.The United States Court of Appeals for the Sixth Circuit reviewed the case de novo. It held that under Kentucky law and the corporation’s bylaws, the third-generation board members did not effectively resign by merely transferring their shares, as resignation required written or oral notice. Therefore, the board remained as constituted before the share transfer, and the special meeting authorizing the direct suit was valid. The court vacated the district court’s judgment, allowing the direct suit by the corporation to proceed, but affirmed dismissal of the derivative claims where demand was made and refused. View "C-Ville Fabricating, Inc. v. Tarter" on Justia Law

A publicly traded reinsurance company experienced significant financial losses over a two-year period due to adverse developments with its largest client, which led to higher-than-expected claim payouts and a dramatic drop in its stock price. Investors, represented by a pension trust and a bank, alleged that the company committed securities fraud by making misleading statements about the adequacy of its reserve funds. Specifically, they claimed the company failed to disclose historical data indicating that its reserves were insufficient, even though it knew of this adverse information.The United States District Court for the District of New Jersey initially denied the company’s motion to dismiss, allowing limited discovery focused on whether the company intentionally omitted the historical loss ratio information. The Magistrate Judge restricted discovery to a narrow scope, declining to require production of all underlying data, and the District Court affirmed this limitation. After this limited discovery, the District Court granted summary judgment for the company, holding that the reserve statements were not misleading as a matter of law because the company had considered the historical data and the omitted information did not “totally eclipse” other factors in the reserve calculations.On appeal, the United States Court of Appeals for the Third Circuit held that the District Court erred in its application of the materiality standard and in denying further discovery. The Third Circuit found that there were genuine disputes of material fact as to whether the omission of adverse historical data was material to investors, given the company’s dependence on its largest client and the significance of historical trends in its reserve-setting process. The court vacated the summary judgment and remanded for full discovery and further proceedings, clarifying that materiality is a context-specific inquiry and that the plaintiffs had presented sufficient evidence to proceed. View "Boilermaker Blacksmith National Pension Trust v. Maiden Holdings Ltd" on Justia Law

A pharmaceutical company developed a sublingual opioid painkiller, DSUVIA, which could only be administered in medically supervised settings due to safety concerns and was subject to a strict FDA Risk Evaluation and Mitigation Strategy (REMS). The company marketed DSUVIA with the slogan “Tongue and Done” at investor conferences, accompanied by additional disclosures about the drug’s limitations and REMS requirements. After the FDA issued a warning letter objecting to the slogan as potentially misleading under the Federal Food, Drug, and Cosmetic Act, several shareholders filed suit, alleging that the slogan misled investors about the complexity of administering DSUVIA and the drug’s limited market potential.The United States District Court for the Northern District of California dismissed the shareholders’ complaint, finding that the plaintiffs failed to adequately plead facts supporting a strong inference of scienter, but did not rule on whether the statements were false or misleading. The plaintiffs were given two opportunities to amend their complaint, but the court ultimately dismissed the case with prejudice.On appeal, the United States Court of Appeals for the Ninth Circuit reviewed the dismissal de novo. The Ninth Circuit held that the plaintiffs failed to adequately plead falsity because a reasonable investor would not interpret the “Tongue and Done” slogan in isolation, but would consider the context provided by accompanying disclosures and other available information. The court also held that the FDA’s warning letter did not establish falsity under securities law, as the standards and intended audiences differ. Additionally, the court found that the plaintiffs did not plead a strong inference of scienter, as the facts suggested the company’s officers acted in good faith. The Ninth Circuit affirmed the district court’s dismissal. View "Sneed v. Talphera, Inc." on Justia Law

Three individuals who worked as precious metals futures traders at major financial institutions were prosecuted for engaging in a market manipulation scheme known as spoofing. This practice involved placing large orders on commodities exchanges with the intent to cancel them before execution, thereby creating a false impression of market supply or demand to benefit their genuine trades. The traders’ conduct was in violation of both exchange rules and their employers’ policies, and the government charged them with various offenses, including wire fraud, commodities fraud, attempted price manipulation, and violating the anti-spoofing provision of the Dodd-Frank Act.The United States District Court for the Northern District of Illinois, Eastern Division, presided over separate trials for the defendants. In the first trial, two defendants were convicted by a jury on all substantive counts except conspiracy, after the court denied their motions for acquittal and a new trial. The third defendant, tried separately, admitted to spoofing but argued he lacked the requisite criminal intent; he was convicted of wire fraud, and his post-trial motions were also denied. The district court made several evidentiary rulings, including admitting lay and investigator testimony, and excluded certain defense exhibits and instructions.The United States Court of Appeals for the Seventh Circuit reviewed the convictions and the district court’s rulings. The appellate court held that spoofing constitutes a scheme to defraud under the federal wire and commodities fraud statutes, and that the anti-spoofing statute is not unconstitutionally vague. The court found sufficient evidence supported all convictions, and that the district court did not abuse its discretion in its evidentiary or jury instruction decisions. The Seventh Circuit affirmed the convictions and the district court’s denial of post-trial motions for all three defendants. View "United States v. Smith" on Justia Law

A dispute arose between a Hawai‘i corporation and one of its directors after the director questioned the validity of a conflict-of-interest clause in the corporation’s articles. The corporation filed a declaratory judgment action against the director, seeking a ruling that the clause was valid. The director moved to dismiss the complaint, arguing there was no actual controversy. The Circuit Court of the First Circuit granted the motion and dismissed the complaint without prejudice, retaining jurisdiction to hear a motion for attorneys’ fees. The director then sought indemnification from the corporation for his legal expenses, relying on both the corporation’s articles and Hawai‘i Revised Statutes (HRS) § 414-243, which mandates indemnification for directors who are “wholly successful, on the merits or otherwise,” in defending proceedings brought against them due to their role as directors.The corporation partially indemnified the director for his defense costs but disputed his entitlement to further fees, particularly those incurred in seeking indemnification itself (“fees on fees”). The Circuit Court denied the director’s motion for additional fees, finding he was not “wholly successful” under the statute because the dismissal was without prejudice. The director appealed to the Intermediate Court of Appeals (ICA), which affirmed the Circuit Court’s decision. The ICA concluded that fees on fees were only available when indemnification was court-ordered, which was not the case here, and declined to address whether the director was “wholly successful” under HRS § 414-243.The Supreme Court of the State of Hawai‘i reviewed the case and reversed both lower courts. It held that a director whose case is dismissed without prejudice and who incurs no liability is “wholly successful” under HRS § 414-243 and thus entitled to mandatory indemnification. The court further held that this statutory indemnification includes reasonable expenses incurred in obtaining indemnification, such as fees on fees. The case was remanded to the Circuit Court to determine the reasonable amount of such expenses. View "Loyalty Development Company, LTD. v. Ching" on Justia Law

Investors in a major drug-development company alleged that the company and two of its officers misled them about the integrity of the company’s overseas supply chain for long-tailed macaques, which are essential for its business. After China halted exports of these monkeys due to the COVID-19 pandemic, the company shifted to suppliers in Cambodia and Vietnam, some of which were later implicated in a federal investigation into illegal wildlife trafficking. Despite public signs of the investigation and seizures of shipments, the company’s CEO assured investors that its supply chain was unaffected by the federal indictment of certain suppliers, and that the indicted supplier was not one of its own. However, evidence suggested that the company was, in fact, sourcing macaques from entities targeted by the investigation, either directly or through intermediaries.The United States District Court for the District of Massachusetts dismissed the investors’ class action complaint, finding that the plaintiffs failed to allege any false or misleading statements or scienter (intent or recklessness), and therefore did not reach the issue of loss causation. The court also dismissed the derivative claim against the individual officers.The United States Court of Appeals for the First Circuit reviewed the dismissal de novo. The appellate court held that the investors plausibly alleged that the company and its CEO knowingly or recklessly misled investors in November 2022 by assuring them that the company’s supply chain was not implicated in the federal investigation, when in fact it was. The court found these statements actionable, but agreed with the lower court that other statements about “non-preferred vendors” were not independently misleading. The First Circuit reversed the district court’s dismissal as to the November 2022 statements and remanded for further proceedings, including consideration of loss causation. Each party was ordered to bear its own costs on appeal. View "State Teachers Retirement System of Ohio v. Charles River Laboratories International, Inc." on Justia Law