Justia Business Law Opinion Summaries

A group of institutional investors brought a class action lawsuit against a pharmaceutical company and several of its officers, alleging violations of federal securities laws after the company’s share price dropped significantly following the rejection of a takeover bid and subsequent negative financial disclosures. One large investor, Sculptor, intended to pursue its own individual lawsuit rather than participate in the class action. The District Court certified the class and issued a notice specifying the procedure and deadline for class members to opt out. Although Sculptor intended to opt out, its counsel failed to submit the required exclusion request by the deadline. Both Sculptor and the company proceeded for years as if Sculptor had opted out, litigating the individual action and treating Sculptor as an opt-out plaintiff.The United States District Court for the District of New Jersey later approved a class settlement, which prompted the discovery that Sculptor had never formally opted out. Sculptor then sought to be excluded from the class after the deadline, arguing that its conduct showed a reasonable intent to opt out, that its failure was due to excusable neglect, and that the class notice was inadequate. The District Court rejected these arguments, finding that only compliance with the court’s specified opt-out procedure sufficed, that Sculptor’s neglect was not excusable under the relevant legal standard, and that the notice met due process requirements.The United States Court of Appeals for the Third Circuit affirmed the District Court’s judgment. The Third Circuit held that a class member must follow the opt-out procedures established by the district court under Rule 23; a mere “reasonable indication” of intent to opt out is insufficient. The court also found no abuse of discretion in denying Sculptor’s late opt-out request and concluded that the class notice satisfied due process. View "Perrigo Institutional Investor Group v. Papa" on Justia Law

A Luxembourg-based investment fund and its former General Partner became embroiled in a complex dispute following a contentious split among the fund’s founders. The fund, originally managed by Novalpina Capital Partners I GP S.À.R.L. (Novalpina), saw its General Partner position transferred to Treo NOAL GP S.à.r.l. (Treo) after a vote by limited partners, including the Oregon Public Employees Retirement Fund (OPERF). The fund’s structure involved multiple entities and significant investments, with allegations of improper conduct and maneuvers by both sides during the transition. Novalpina and Treo subsequently initiated several lawsuits in Luxembourg, including actions over control of the fund and claims for financial entitlements.Novalpina filed an ex parte petition in the United States District Court for the District of Oregon under 28 U.S.C. § 1782, seeking discovery from Oregon officials for use in foreign proceedings, specifically the Veto Right Litigation and a contemplated fraud claim. Treo, Langdon, and Read intervened, and the district court granted the petition, finding statutory and discretionary factors favored Novalpina. The parties negotiated a protective order, which allowed use of the documents in litigation related to the events described in the petition. After Novalpina used the documents in additional foreign proceedings, Treo moved for reconsideration of the discovery grant and to modify the protective order, arguing misuse and misrepresentation.The United States Court of Appeals for the Ninth Circuit reviewed the district court’s denial of Treo’s motions. The Ninth Circuit held that documents produced under § 1782 for use in specified foreign proceedings may be used in other proceedings unless the district court orders otherwise. The court found no abuse of discretion in the district court’s denial of Treo’s motion for reconsideration or its request to modify the protective order, affirming the district court’s rulings. View "NOVALPINA CAPITAL PARTNERS I GP S.A.R.L V. READ" on Justia Law

P&J Beverage Corporation filed a lawsuit against the City of Columbus, seeking to prevent the city from issuing an alcoholic beverage license to The Bottle Shop, LLC, and later sought to revoke the license after it was issued. P&J argued that The Bottle Shop’s location was too close to a daycare, which it claimed qualified as a “school” under city ordinances. The trial court granted summary judgment to P&J, invalidating The Bottle Shop’s license and enjoining its operation. The Bottle Shop’s attorney then emailed P&J’s attorney, referencing a potential claim for wrongful injunction if the appellate court reversed the trial court’s order, and requested a stay of the injunction pending appeal. P&J declined, and The Bottle Shop’s motion for a stay was denied by the trial court but later granted by the Court of Appeals, which ultimately reversed the trial court’s decision on the merits.Subsequently, The Bottle Shop sued P&J for both abusive litigation and wrongful injunction, seeking damages, attorney fees, and punitive damages. At trial, The Bottle Shop presented evidence of lost revenue, overhead costs, and attorney fees incurred during the period it was closed. The jury awarded substantial damages, attorney fees, and punitive damages. The trial court entered judgment accordingly. P&J moved for a directed verdict and for judgment notwithstanding the verdict, arguing, among other things, that The Bottle Shop failed to provide the statutory notice required for an abusive litigation claim. The trial court denied these motions, and the Court of Appeals affirmed, holding that the email satisfied the statutory notice requirement.The Supreme Court of Georgia reviewed the case and held that the email sent by The Bottle Shop did not satisfy the statutory notice requirement under OCGA § 51-7-84 (a) for an abusive litigation claim, as it failed to identify the civil proceeding as abusive litigation. The Court vacated the trial court’s judgment and remanded the case for further proceedings to determine what portion of the damages, if any, remain valid. View "P& J BEVERAGE CORPORATION v. THE BOTTLE SHOP, LLC" on Justia Law

Three individuals served as sales agents for a California company that marketed and sold fractional interests in life settlements, which are transactions where investors purchase life insurance policies from insured individuals, pay the ongoing premiums, and receive the death benefit when the insured passes away. The company selected which policies to purchase, determined the purchase price, and managed a complex premium reserve system to fund ongoing premium payments. Investors relied on the company’s expertise in selecting policies and managing the reserve system, and their interests in each policy were fractionalized among multiple investors. When the reserve system failed due to insureds living longer than projected, the company made additional premium calls to investors, and some investors lost their investments if they did not pay.The United States District Court for the Central District of California granted summary judgment in favor of the Securities and Exchange Commission (SEC) against the three sales agents. The court found that the fractional interests in life settlements were securities under the Securities Act of 1933, that no exemption from registration applied, and that the sales agents had not registered as broker-dealers. The court ordered disgorgement of a portion of the agents’ commissions, imposed civil penalties, and enjoined one agent from future violations.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s judgment. The Ninth Circuit held that the fractional interests in life settlements were investment contracts and thus securities, because investors’ profits depended on the company’s selection of policies, management of the premium reserve system, and the structure of the fractionalized interests. The court also held that the offerings were not exempt from registration as intrastate offerings, as they were integrated and included at least one out-of-state investor. The court affirmed the remedies, finding that investors suffered pecuniary harm through the loss of the time value of their money. View "UNITED STATES SECURITIES AND EXCHANGE COMMISSION V. BARRY" on Justia Law

A medical device distributor sued a former employee, alleging that he breached a non-compete agreement, his duty of loyalty, and misappropriated trade secrets after joining a competitor. The employee responded with counterclaims and third-party claims. During the litigation, the employee filed for Chapter 7 bankruptcy, which stayed the district court proceedings. In the bankruptcy case, the distributor filed a proof of claim for damages, which the employee did not contest. The bankruptcy court allowed the claim, and the distributor received a partial distribution from the bankruptcy estate. The employee also waived his right to discharge, leaving him potentially liable for the remaining balance.After the bankruptcy case closed, the United States District Court for the District of Vermont lifted the stay. The distributor sought summary judgment for the balance of its allowed claim, arguing that the bankruptcy court’s allowance of its claim should have preclusive effect. Initially, the district court denied this request, finding that using claim preclusion offensively would be unfair. Upon reconsideration, however, the district court reversed itself and granted summary judgment to the distributor for the remaining balance, holding that claim preclusion applied.On appeal, the United States Court of Appeals for the Second Circuit reviewed the district court’s grant of summary judgment de novo. The Second Circuit held that, even if claim preclusion could sometimes be used offensively, it could not be applied in this case because it would be unfair to the employee, who had less incentive to contest the claim in bankruptcy. The court vacated the district court’s judgment in favor of the distributor and remanded the case for further proceedings. The main holding is that claim preclusion cannot be used offensively to secure a judgment for the balance of an allowed bankruptcy claim under these circumstances. View "Thermal Surgical, LLC v. Brown" on Justia Law

A group of individuals and organizations challenged a longstanding policy of the Securities and Exchange Commission (SEC), codified as Rule 202.5(e), which requires defendants in civil enforcement actions to agree not to publicly deny the allegations against them as a condition of settlement. This “no-deny” provision has been in place since 1972 and is incorporated into settlement agreements, with the SEC’s remedy for a breach being the ability to ask the court to reopen the case. The petitioners argued that this rule violates the First Amendment and was improperly adopted under the Administrative Procedure Act (APA).Previously, the New Civil Liberties Alliance (NCLA) petitioned the SEC to amend Rule 202.5(e) to remove the no-deny requirement, citing constitutional concerns. The SEC denied the petition, explaining that defendants can voluntarily waive constitutional rights in settlements and that the rule preserves the agency’s ability to litigate if a defendant later denies the allegations. After the denial, the petitioners sought review in the United States Court of Appeals for the Ninth Circuit, asserting both First Amendment and APA violations.The United States Court of Appeals for the Ninth Circuit reviewed the SEC’s denial. Applying the Supreme Court’s framework from Town of Newton v. Rumery, the court held that voluntary waivers of constitutional rights, including First Amendment rights, are generally permissible if knowing and voluntary. The court concluded that Rule 202.5(e) is not facially invalid under the First Amendment, as it is a limited restriction tied to the settlement context and does not preclude all speech. The court also found that the SEC had statutory authority for the rule, was not required to use notice-and-comment rulemaking, and provided a rational explanation for its decision. The petition for review was denied, but the court left open the possibility of future as-applied challenges. View "POWELL V. UNITED STATES SECURITIES AND EXCHANGE COMMISSION" on Justia Law

Several individuals formed a corporation, each contributing initial capital and later making additional cash contributions to meet the company’s needs. These later contributions were documented as promissory notes, including three notes issued to one founder, which were subsequently held by a trust after his death. The notes specified a 24-month term, a fixed interest rate, and repayment terms, but did not explicitly state they were payable on demand. After the founder’s death, the trust demanded payment on the notes, but the company refused, arguing the notes were not yet due, were actually capital contributions, or were subordinate to other shareholder loans.The District Court of Albany County dismissed claims by other shareholders seeking priority repayment, finding no justiciable controversy, and resolved the remaining issues on summary judgment. The court determined the notes were loans, not capital contributions, and that all founders’ notes should be repaid equitably if any were repaid. However, it found the notes were not immediately due and payable, as they lacked a demand provision, and denied the trust’s request for immediate payment. The court did award attorney fees to the trust under the terms of the notes.The Supreme Court of Wyoming reviewed the case and reversed the district court’s finding that the notes were not due and payable, holding that the notes matured after 24 months and were enforceable at that time. The court affirmed that the notes were loans, not capital contributions, and declined to give priority to other shareholder loans, finding no contractual basis for subordination. The court also affirmed the award of attorney fees to the trust and upheld the dismissal of the other shareholders’ claims for lack of a justiciable controversy. The case was remanded for entry of judgment in favor of the trust and determination of reasonable attorney fees and costs. View "King v. Sheesley" on Justia Law

A group of federally funded health centers and clinics serving low-income populations alleged that several major drug manufacturers conspired to restrict drug discounts offered through the federal Section 340B Drug Discount Program. The plaintiffs claimed that, beginning in 2020, the manufacturers coordinated efforts to limit the availability of discounted diabetes medications at contract pharmacies, resulting in significant financial losses for safety-net providers. The manufacturers, who are direct competitors in the diabetes drug market, allegedly implemented similar policies within a short timeframe, each restricting or eliminating the discounts in ways that had a comparable anticompetitive effect.After the plaintiffs filed a class action complaint, the United States District Court for the Western District of New York dismissed their first amended complaint and denied leave to file a second amended complaint. The district court concluded that the plaintiffs failed to allege sufficient parallel conduct or factual circumstances suggesting a conspiracy, and thus found the proposed amendments futile.The United States Court of Appeals for the Second Circuit reviewed the case and applied a de novo standard to both the dismissal and the denial of leave to amend. The Second Circuit held that the plaintiffs’ proposed second amended complaint alleged enough facts to plausibly infer a horizontal price-fixing conspiracy under Section 1 of the Sherman Act. The court found that the complaint sufficiently pled both parallel conduct and “plus factors” such as a common motive to conspire, actions against individual economic self-interest, and a high level of interfirm communications. The court also determined that Supreme Court precedents cited by the defendants did not bar the plaintiffs’ claims. Accordingly, the Second Circuit vacated the district court’s judgment and remanded the case with instructions to allow the plaintiffs to file their second amended complaint. View "Mosaic Health, Inc. v. Sanofi-Aventis U.S., LLC" on Justia Law

Two companies, HBKY and Elk River, each claimed rights to thousands of acres of timber in Kentucky based on their respective contracts with a third party, Kingdom Energy Resources. Kingdom had entered into a timber sales contract with Elk River, allowing Elk River to cut and remove timber from certain land. Separately, Kingdom obtained a $22 million loan from a group of lenders, with HBKY acting as their agent, and mortgaged several properties—including the timber in question—as collateral for the loan. Kingdom later breached both agreements: it ousted Elk River from the land, violating the timber contract, and defaulted on the loan, leaving both HBKY and Elk River with competing claims to the timber.After HBKY secured a judgment in a New York federal court declaring Kingdom in default, it registered the judgment in the United States District Court for the Eastern District of Kentucky and initiated foreclosure proceedings on the collateral, including the timber. Elk River and its president, Robin Wilson, were joined as defendants due to their claimed interest. The district court granted summary judgment to HBKY, finding that Elk River did not obtain title to the timber under its contracts, did not have a superior interest, and was not a buyer in the ordinary course of business under Kentucky law.The United States Court of Appeals for the Sixth Circuit reviewed the case de novo. The court held that the loan documents did not authorize a sale of the timber free of HBKY’s security interest, as the mortgage explicitly stated that the security interest would survive any sale. The court also found that Elk River failed to provide sufficient evidence to establish its status as a buyer in the ordinary course of business. Accordingly, the Sixth Circuit affirmed the district court’s grant of summary judgment in favor of HBKY. View "HBKY, LLC v. Elk River Export, LLC" on Justia Law

A group of industrial and commercial purchasers of natural gas in Wisconsin alleged that several gas companies participated in a conspiracy to fix natural gas prices between 2000 and 2002. The plaintiffs claimed that the defendants engaged in practices such as wash trading, churning, and false reporting to manipulate published price indices, which in turn affected the prices paid by purchasers in Wisconsin. The plaintiffs sought remedies under Wisconsin antitrust law, including both a “full consideration” refund of payments made under contracts tainted by the conspiracy and treble damages.The litigation was initially consolidated with similar cases from other states in multidistrict proceedings in the District of Nevada, where class certification was denied. After the Ninth Circuit vacated that denial and remanded, the Wisconsin case was returned to the United States District Court for the Western District of Wisconsin. There, the plaintiffs renewed their motion for class certification under Federal Rule of Civil Procedure 23(b)(3), relying on expert testimony to show that the alleged price-fixing had a common impact on all class members. The defendants countered with their own experts, arguing that the natural gas market’s complexity and variations in contract terms precluded common proof of impact. The district court certified the class, finding that common questions predominated, but did not fully resolve the disputes between the parties’ experts.The United States Court of Appeals for the Seventh Circuit reviewed the class certification order. The court held that, under recent Supreme Court and Seventh Circuit precedent, the district court was required to engage in a more rigorous analysis of the conflicting expert evidence regarding antitrust impact and the existence of a national market. The Seventh Circuit vacated the class certification and remanded the case for further proceedings, instructing the district court to make factual findings on these expert disputes before deciding whether class certification is appropriate. View "Arandell Corporation v. Xcel Energy Inc." on Justia Law