Justia Business Law Opinion Summaries

The case involves a dispute over the enforceability of a noncompetition provision in an operating agreement following the partial sale of a business interest. Robert and Stephen Samuelian co-founded Life Generations Healthcare, LLC, and later sold a portion of their interest in the company. The new operating agreement included a noncompetition clause that the Samuelians later challenged in arbitration. The arbitrator found the provision invalid per se under California Business and Professions Code section 16600, which generally voids contracts restraining lawful professions, trades, or businesses.The Superior Court of Orange County reviewed the arbitrator's decision de novo and confirmed the award, agreeing that the noncompetition provision was invalid per se. The court also found that the Samuelians did not owe fiduciary duties to the company as minority members in a manager-managed LLC. The company and individual defendants appealed, arguing that the arbitrator applied the wrong legal standard and that the reasonableness standard should apply instead.The California Court of Appeal, Fourth Appellate District, Division Three, reviewed the case and concluded that the arbitrator had indeed applied the wrong standard. The court held that noncompetition agreements arising from the partial sale of a business interest should be evaluated under the reasonableness standard, not the per se standard. The court reasoned that partial sales differ significantly from the sale of an entire business interest, as the seller remains an owner and may still have some control over the company. Therefore, such noncompetition provisions must be scrutinized for their procompetitive benefits.The Court of Appeal reversed the trial court's judgment confirming the arbitration award and directed the trial court to enter an order denying the Samuelians' petition to confirm the award and granting the company's motion to vacate the entire award, including the portion awarding attorney fees and costs. View "Samuelian v. Life Generations Healthcare, LLC" on Justia Law

Wilfred L. Doll and Cheri L. Doll (Dolls) were members of Little Big Warm Ranch, LLC (LBWR), a business formed to manage water rights in Phillips County. Dolls negotiated a settlement with Finch/Dements for senior water rights, which devalued LBWR’s property. LBWR members consented to the settlement on the day they closed on the Finch/Dement property. Dolls later filed a complaint seeking dissolution of LBWR or a buy-out of their shares. LBWR amended its operating agreement to expel adverse members and seek attorney fees and costs, excluding Dolls from the meeting where these amendments were ratified.The Seventeenth Judicial District Court, Phillips County, ruled that Dolls dissociated from LBWR on February 2, 2018, when they filed their complaint. The court also granted LBWR summary judgment on its counterclaims for breach of fiduciary duties and the obligation of good faith and fair dealing, applying the eight-year statute of limitation for contracts. A jury awarded LBWR $2.5 million in compensatory and punitive damages. The District Court ordered Dolls to pay LBWR with 11.25% interest and LBWR to pay Dolls $434,000 per share with 7.5% interest.The Supreme Court of the State of Montana affirmed the District Court’s ruling that Dolls dissociated on February 2, 2018, and upheld the calculation of Dolls’ distributional interest. The court determined that the eight-year statute of limitation for contracts applied to LBWR’s counterclaims, as the fiduciary duties arose from the operating agreement. However, the court found that punitive damages were improper because they are not allowed in breach of contract actions under Montana law. The case was remanded to the District Court to modify its judgment to exclude punitive damages. View "Doll v. Little Big Warm Ranch, LLC" on Justia Law

Taxinet Corporation sued Santiago Leon, alleging various claims stemming from a joint effort to secure a government concession for a taxi-hailing app in Mexico City. The district court granted summary judgment for Leon on all claims except for a Florida-law unjust enrichment claim, which went to trial along with Leon’s counterclaims for fraudulent and negligent misrepresentation. The jury awarded Taxinet $300 million for unjust enrichment and Leon $15,000 for negligent misrepresentation. However, the district court granted Leon’s Rule 50(b) motion for judgment as a matter of law, ruling that the damages award was based on inadmissible hearsay and was speculative.The United States District Court for the Southern District of Florida initially allowed testimony regarding a $2.4 billion valuation by Goldman Sachs, which was later deemed inadmissible hearsay. The court concluded that without this evidence, there was insufficient support for the jury’s $300 million award. The court also noted that the valuation was speculative and not directly tied to the benefit conferred by Taxinet in 2015.The United States Court of Appeals for the Eleventh Circuit affirmed the district court’s Rule 50(b) order, agreeing that the valuation evidence was inadmissible hearsay and that the remaining evidence was insufficient to support the $300 million award. However, the appellate court exercised its discretion to remand for a new trial on the unjust enrichment claim. The court found that Taxinet had presented enough evidence to show that it conferred a benefit on Leon, which he accepted, and that it would be inequitable for him to retain the benefit without payment. The court also noted that Taxinet could potentially present other evidence of damages in a new trial.The appellate court affirmed the district court’s summary judgment on Taxinet’s other claims, ruling that the alleged joint venture agreement was subject to Florida’s statute of frauds, as it could not be completed within a year. Thus, any claims based on the existence of the joint venture agreement were barred. View "Taxinet Corp. v. Leon" on Justia Law

Grand Peaks, a nonprofit healthcare provider, applied for a full property tax exemption for its clinics and administrative offices in Rexburg, Idaho, under Idaho Code section 63-602C. Grand Peaks argued that it qualifies as a charitable organization and uses its property exclusively for charitable purposes, providing healthcare to underserved communities regardless of patients' ability to pay. The Madison County Board of Equalization granted a partial tax exemption of sixty-five percent, citing concerns about competition with for-profit healthcare providers and the revenue generated from insured patients.Grand Peaks appealed to the District Court of the Seventh Judicial District, which found that Grand Peaks qualified as a charitable organization and used its property exclusively for charitable purposes. However, the district court remanded the case to the Board for further fact-finding, suggesting that the partial tax exemption might be appropriate due to the "revenue-generating" nature of some of Grand Peaks' activities. The district court vacated the Board's sixty-five percent exemption, deeming it arbitrary and capricious.The Supreme Court of Idaho reviewed the case and reversed the district court's order for remand. The Court held that Grand Peaks is entitled to a full tax exemption under Idaho Code section 63-602C. The Court clarified that the proper test for tax exemption focuses on the exclusive use of the property for charitable purposes, not the income generated from the property. The Court found substantial and competent evidence supporting that Grand Peaks' properties are used exclusively for its charitable mission. The case was remanded to the district court with instructions to grant Grand Peaks a one hundred percent tax exemption for the properties at issue. Grand Peaks was awarded costs on appeal. View "Upper Valley Community Health Svcs, Inc. v. Madison County" on Justia Law

Jason Ziemann, the plaintiff, became involved in the operation of Grosz Wrecking, a business owned by his grandmother, Juanita Grosz, after her husband passed away. Ziemann moved into a home on the business property in 2014. In 2022, Grosz sought to evict Ziemann after he refused to purchase the home. Ziemann then sued Grosz, alleging they had an oral partnership agreement and sought a declaration of partnership, accounting, and dissolution, along with claims for breach of fiduciary duties and tortious interference with a business relationship. Grosz denied the partnership and counterclaimed for trespass.The District Court of McLean County denied Ziemann’s motion for partial summary judgment, ruling factual issues existed regarding the partnership. The court granted Grosz’s motion, dismissing Ziemann’s claims for tortious interference and breach of fiduciary duty, citing inadmissible hearsay and lack of evidence for damages. After a bench trial, the court found the parties had formed a partnership with specific profit-sharing terms and dismissed Grosz’s trespass claim, allowing Ziemann to remain on the property until the business was dissolved. The court ordered the liquidation of partnership assets and awarded Ziemann costs.The Supreme Court of North Dakota reviewed the case. It affirmed the lower court’s findings that a partnership existed and that Grosz contributed property to it. The court also upheld the dismissal of Grosz’s trespass claim and Ziemann’s claims for tortious interference and breach of fiduciary duty. However, it reversed the lower court’s decision not to apply the default partnership winding up provisions under N.D.C.C. § 45-20-07. The case was remanded for the district court to enter judgment consistent with this decision. The Supreme Court affirmed the award of costs and disbursements to Ziemann as the prevailing party. View "Ziemann v. Grosz" on Justia Law

The case involves a dispute over attorneys' fees following a $1 billion settlement in litigation challenging Dell Technologies' redemption of Class V stock. The plaintiff, Steamfitters Local 449 Pension Plan, alleged that Dell Technologies, controlled by Michael Dell and Silver Lake Group LLC, redeemed the Class V stock at an unfair price. The litigation was complex, involving extensive discovery and expert testimony, and was settled on the eve of trial.The Court of Chancery of the State of Delaware awarded 26.67% of the settlement, or $266.7 million, as attorneys' fees. Pentwater Capital Management LP and other class members objected, arguing that the fee was excessive and that a declining percentage method should be applied, similar to federal securities law cases. The Court of Chancery rejected this argument, holding that Delaware law, as established in Sugarland Industries, Inc. v. Thomas and Americas Mining Corp. v. Theriault, does not mandate a declining percentage approach. The court found that the $1 billion settlement was a significant achievement and that the fee award was justified based on the results achieved, the time and effort of counsel, and other relevant factors.The Supreme Court of the State of Delaware reviewed the case and affirmed the Court of Chancery's decision. The Supreme Court held that the Court of Chancery did not exceed its discretion in awarding 26.67% of the settlement as attorneys' fees. The court emphasized that the Sugarland factors, particularly the results achieved, are paramount in determining fee awards. The Supreme Court also noted that while a declining percentage approach is permissible, it is not mandatory, and the Court of Chancery adequately justified its decision not to apply it in this case. View "In re Dell Technologies Inc." on Justia Law

Mark Nordlicht, founder and chief investment officer of Platinum Partners, defrauded Black Elk Energy Offshore Operations' creditors of nearly $80 million, transferring the funds to his hedge fund’s investors, including Shlomo and Tamar Rechnitz, who received about $10.3 million. Nordlicht was later convicted of securities fraud. Black Elk declared bankruptcy, and the Trustee initiated an adversary proceeding against the Rechnitzes to recover the transferred funds.The bankruptcy court ruled that the Trustee could recover the money from the Rechnitzes under 11 U.S.C. §§ 544, 548(a)(1), and 550(a), rejecting their defense under 11 U.S.C. § 550(b)(1) that they were good faith transferees. The court imputed Nordlicht’s knowledge of the fraudulent scheme to the Rechnitzes, as he acted as their agent. The court also found that the funds transferred to the Rechnitzes were traceable to the fraudulent scheme. The district court affirmed the bankruptcy court’s decision.The United States Court of Appeals for the Fifth Circuit reviewed the case and affirmed the lower courts' rulings. The court held that the knowledge of an agent (Nordlicht) is imputed to the principal (the Rechnitzes) under 11 U.S.C. § 550(b)(1), and thus, the Rechnitzes could not claim to be good faith transferees. The court also found that Nordlicht’s actions were within the scope of his authority as the Rechnitzes’ agent. Additionally, the court upheld the bankruptcy court’s tracing methodology, which assumed that tainted funds were used first, finding it appropriate under the circumstances. The court concluded that the Trustee could recover the $10.3 million from the Rechnitzes. View "Rechnitz v. Schmidt" on Justia Law

In this case, Randall C. Belyea was the sole shareholder and president of Belyea Enterprises, Inc. (BEI), which had a contract with FedEx. Due to a misdemeanor charge, FedEx refused to renew the contract with Belyea, leading him to transfer his interest in BEI to his fiancée, Heather A. Campbell, under the understanding that she would be the owner in name only while he continued to run the business. However, in 2018, Campbell terminated Belyea's employment and restricted his access to BEI's bank accounts.The Superior Court (Aroostook County) initially granted Campbell’s motion for judgment as a matter of law on Belyea’s conversion claim and later entered judgment as a matter of law in favor of Campbell on Belyea’s breach of contract claim, despite a jury verdict in Belyea’s favor. The court found that there was insufficient evidence of an enforceable contract between Belyea and Campbell, as the terms were too vague and indefinite.The Maine Supreme Judicial Court reviewed the case and affirmed the lower court's decisions. The court held that the terms of the alleged contract between Belyea and Campbell were not sufficiently definite to form an enforceable contract. The terms did not clearly define the roles and obligations of each party, the duration of the contract, or the details regarding a possible reconveyance of BEI to Belyea. Consequently, the court also upheld the judgment in favor of Campbell on the conversion claim, as Belyea did not have a legal interest in BEI in 2018. View "Belyea v. Campbell" on Justia Law

Overwell Harvest, Ltd. invested millions in Neurensic, Inc., which soon faced severe financial difficulties. Neurensic's management, led by CEO David Widerhorn and COO Paul Giedraitis, sought to sell the company. Trading Technologies International, Inc. emerged as a potential buyer. Before the shareholders' vote on the sale, Overwell made a competing offer, prompting Trading Technologies to increase its offer, which Neurensic's board accepted. The shareholders approved the sale to Trading Technologies. Overwell then sued Trading Technologies, alleging it aided and abetted breaches of fiduciary duties by Neurensic's management.The United States District Court for the Northern District of Illinois rejected Overwell's jury demand, ruling that its aiding and abetting claim was equitable, despite seeking legal relief. After a bench trial, the court found in favor of Trading Technologies, concluding that Overwell failed to prove any fiduciary breaches by Widerhorn and Giedraitis that Trading Technologies could have aided and abetted. Overwell appealed, arguing that the district court erred in denying a jury trial.The United States Court of Appeals for the Seventh Circuit reviewed the case and agreed with Overwell that it had a right to a jury trial because it sought legal relief. However, the court found that the district court's error was harmless. The appellate court concluded that Trading Technologies would have been entitled to a directed verdict because Overwell failed to establish that Trading Technologies knowingly participated in any fiduciary breaches by Neurensic's management. Consequently, the Seventh Circuit affirmed the district court's judgment. View "Overwell Harvest, Limited v. Trading Technologies International, Inc." on Justia Law

Ryan Cox filed a class action lawsuit alleging that the defendants manipulated the price of a cryptocurrency called HEX by artificially lowering its ranking on CoinMarketCap.com. The defendants include two domestic companies, a foreign company, and three individual officers of the foreign company. Cox claimed that the manipulation caused HEX to trade at lower prices, benefiting the defendants financially.The United States District Court for the District of Arizona dismissed the case for lack of personal jurisdiction, concluding that Cox needed to show the defendants had sufficient contacts with Arizona before invoking the Commodity Exchange Act's nationwide service of process provision. The court found that none of the defendants had sufficient contacts with Arizona.The United States Court of Appeals for the Ninth Circuit reviewed the case and held that the Commodity Exchange Act authorizes nationwide service of process independent of its venue requirement. The court concluded that the district court had personal jurisdiction over the U.S. defendants, CoinMarketCap and Binance.US, because they had sufficient contacts with the United States. The court also found that Cox's claims against these defendants were colorable under the Commodity Exchange Act. Therefore, the court reversed the district court's dismissal of the claims against the U.S. defendants and remanded for further proceedings.However, the Ninth Circuit affirmed the district court's dismissal of the claims against the foreign defendants, Binance Capital and its officers, due to their lack of sufficient contacts with the United States. The court vacated the dismissal "with prejudice" and remanded with instructions to dismiss the complaint against the foreign defendants without prejudice. View "COX V. COINMARKETCAP OPCO, LLC" on Justia Law