Justia Business Law Opinion Summaries

The First Circuit affirmed the judgment of the district court dismissing this complaint against Karoypharm Therapuetics, Inc. and its corporate officers (collectively, Defendants) alleging securities fraud in violation of sections 10(b) and 20(a) of the Securities Exchange Act, 15 U.S.C. 78j(b) and 78t(a), and Securities and Exchange Commission (SEC) Rule 10-b, 18 C.F.R. 240.10b-5, holding that the district court correctly dismissed the complaint for failure to state a claim.Plaintiff-investors brought this action following a decline in Karyopharm's stock price, alleging that Karyopharm materially misled them as to the safety and efficacy of the company's cancer-fighting drug candidate selinexor. The district court dismissed the complaint for failure to state a claim, concluding that Plaintiffs failed adequately to plead scienter with respect to Defendants' statements about a certain study of the drug as a treatment for pinta-refractory multiple myeloma. The First Circuit affirmed on other grounds, holding that Plaintiffs did not plausibly allege an actionable statement or omission with respect to the trial disclosures, and therefore, dismissal was appropriate. View "Thant v. Karyopharm Therapeutics Inc." on Justia Law

The Alaska Department of Revenue audited a non-resident corporation doing business in Alaska. The Department issued a deficiency assessment based in part on an Alaska tax statute requiring an income tax return to include certain foreign corporations affiliated with the taxpaying corporation. The taxpayer exhausted its administrative remedies and then appealed to the superior court, arguing that the tax statute the Department applied was facially unconstitutional because: (1) it violated the dormant Commerce Clause by discriminating against foreign commerce based on countries’ corporate income tax rates; (2) it violated the Due Process Clause by being arbitrary and irrational; and (3) it violated the Due Process Clause by failing to provide notice of what affiliates a tax return must include, and therefore is void for vagueness. The superior court rejected the first two arguments but ruled in the taxpayer’s favor on the third argument. The Department appealed, claiming the superior court erred by concluding that the statute was void for vagueness in violation of the Due Process Clause. The taxpayer cross-appealed, asserting that the court erred by concluding that the statute did not violate the Commerce Clause and was not arbitrary. After review, the Alaska Supreme Court reversed the superior court’s decision that the statute was facially unconstitutional on due process grounds, and affirmed the court’s decision that it otherwise was facially constitutional. View "Alaska Dept. of Revenue v. Nabors International Finance, Inc. et al." on Justia Law

In an appeal from a district court ruling reducing an order of attachment in aid of arbitration. The district court had initially granted an ex parte order in favor of Petitioner, an Iraqi cell phone company (“Telecom”), attaching up to $100 million of the assets of Respondent, a Lebanese bank. Thereafter, the district court exercised its discretion and reduced the amount of the attachment to $3 million in part because of concerns the attachment would have an adverse impact on the Lebanese economy.Telecom appealed arguing that (1) it established a probability of success in the pending arbitration and was therefore entitled to an attachment of $100 million and (2) the district court lacked authority to consider extraordinary circumstances in reducing the attachment.The Second Circuit affirmed to the extent that the district court held that it had the discretion to consider extraordinary circumstances and that Telecom demonstrated a continuing need for the attachment, and to the extent that the district court attached $3 million; vacated to the extent the district court attached only $3 million based on the existence of extraordinary circumstances without considering how those circumstances might change given an attachment greater than $3 million but less than $42 million; and remanded as to (a) Telecom's probability of success, (b) the assessment of extraordinary circumstances, and (c) the amount of the attachment above $3 million. View "Iraq Telecom Ltd. v. IBL Bank S.A.L." on Justia Law

This appeal arises from an enforcement action brought by the Securities and Exchange Commission (SEC) against Appellants World Tree Financial, L.L.C. (World Tree) and its principals. After a bench trial, the district court found that the principal and World Tree engaged in a fraudulent “cherry-picking” scheme, in which they allocated favorable trades to themselves and favored clients and unfavorable trades to disfavored clients. It also found that all three Appellants made false and misleading statements about the firm’s allocation and trading practices. The court entered permanent injunctions against the principal and World Tree, ordered them to disgorge ill-gotten gains, and imposed civil penalties on each Appellant.   The Fifth Circuit affirmed, holding that Liu v. SEC, 140 S. Ct. 1936, 1940 (2020) does not require the district court to conduct its own search for business deductions that Appellants have not identified. Accordingly, the court held that the district court did not abuse its discretion in ordering disgorgement.   The court explained that unlike in Liu, in this case, Appellants did not challenge the SEC’s proposed disgorgement amount in their pretrial or posttrial submissions—instead, they argued only that there was no “basis for disgorgement.” Nor did the principal and World Tree propose specific deduction amounts, either before the district court or to this court. View "SEC v. World Tree" on Justia Law

Defendant challenged the district court’s disgorgement order against him and Owings Group, LLC, the entity he founded and controlled. Together, Defendant, Owings, and three codefendants perpetrated a fraudulent scheme in violation of federal securities laws. After Defendant consented to an entry of judgment, the court ordered him to disgorge $681,554 and imposed a monetary penalty in the same amount.Defendant argued that the disgorgement order violates Liu v. SEC, 140 S. Ct. 1936 (2020) and that the district court erroneously premised the associated monetary penalty on joint-and-several liability. The Fourth Circuit affirmed the district court’s disgorgement order and its monetary penalty.The court explained that it agreed with the district court that Defendant and Owings were “partners engaged in concerted wrongdoing". The court wrote that Owings’s conduct in the scheme generated its ill-gotten gains—and Defendant controlled that conduct. Further, the district court didn’t order a joint-and-several penalty. It ordered a penalty equal to Defendant's disgorgement, which happened to be joint and several.Finally, the court concluded that it found no abuse of discretion. Though the district court didn’t explicitly discuss Defendant's financial situation, it’s clear to the court that the district court considered it, along with the remaining factors. The district court understood that all the defendants were insolvent but decided that Defendant's substantially more serious role in the scheme warranted a penalty all the same. View "SEC v. Mark Johnson" on Justia Law

Blayne Puklich and Elyse Puklich were the children of Stan Puklich, who owned and operated an automobile dealership before his death. The dispute arose from the parties’ ownership of various business interests they either purchased or received from their father. Puklich Chevrolet, Inc. (PCI) owned the automobile dealership. B&E Holdings owned the real estate where the dealership was located. Blayne and Elyse each owned interests in these entities, and Elyse had assumed management responsibilities for both. Blayne appealed, individually and derivatively on behalf of B&E Holdings, LLP, a judgment dismissing his breach of fiduciary duty claim against Elyse and END L.L.L.P. Elyse cross appealed, arguing the district court erred when it denied her motion for N.D.R.Civ.P. 11 sanctions. The court held Blayne’s claim, which alleged Elyse breached fiduciary duties by usurping a real estate opportunity, was res judicata but not frivolous. Finding no reversible error as to either claim, the North Dakota Supreme Court affirmed the trial court. View "Puklich v. Puklich, et al." on Justia Law

The Seventh Circuit affirmed the judgment of the district court concluding that the terms of a settlement resulted in a de facto assignment of a corporation's theoretical legal malpractice claim to Amit Shah by using the corporation as his alter ego, holding that there was no error.In 2013, Shah and another minority shareholder of Duro, Inc. brought this action against Duro and its third shareholder, alleging money laundering and racketeering. In 2015, Plaintiffs added a shareholder derivative claim of legal malpractice, nominally on behalf of Duro, against a law firm and its attorneys (May Oberfell), who had represented Defendants in the case. In 2017, Plaintiffs settled their claims, preserving any claims Duro might have against May Oberfell. Shah subsequently took effective control of Duro and transferred all of Duro's assets except the legal malpractice claim. Thereafter, Shah, through Duro, filed a complaint against May Oberfell. The district court granted summary judgment for May Oberfell, concluding that the legal malpractice claim had undergone a "de facto" assignment, and therefore, the claim was barred under Indiana law. The Seventh Circuit affirmed, holding that May Oberfell was entitled to summary judgment. View "Duro, Inc. v. Walton" on Justia Law

Plaintiff appealed the dismissal of his direct suit against Defendant Brightstar Asia, Ltd. In connection with the sale of his company, Harvestar, to Brightstar Asia, Plaintiff entered into a contract with Brightstar Asia, Harvestar, and his co-founder. The contract provided that conflicted transactions between Brightstar Asia and Harvestar must be on “terms no less favorable to” Harvestar than those of an arms-length transaction. Plaintiff alleged in his complaint that Brightstar Asia engaged in conflicted transactions that rendered his options rights worthless. Those actions, according to Plaintiff, breached both the express terms of the contract and the implied covenant of good faith and fair dealing. The district court dismissed his complaint for raising claims that could be brought only in a derivative suit.   The Second Circuit agreed that Plaintiff can bring a claim for breach of the express conflicted-transactions provision only in a derivative suit. However, the court held that Plaintiff may bring a direct suit for breach of the covenant of good faith and fair dealing because that covenant is based on his individual options rights. Accordingly, the court affirmed in part and vacated in part the district court’s judgment.   The court explained that the inquiry into whether a claim is direct, and a plaintiff, therefore, has “standing” to bring it, is not an Article III standing inquiry Even if the district court were right that Plaintiff’s claims had to be brought in a derivative suit, it should have dismissed the complaint for failure to state a claim. View "Miller v. Brightstar Asia, Ltd." on Justia Law

Plaintiff, who owned a 1 percent interest in a limited liability company (LLC), filed a lawsuit seeking judicial dissolution of the LLC under Corporations Code section 17707.03. Defendants, other members of the LLC who together held 50 percent of the membership interests, filed a motion to avoid the dissolution by purchasing Plaintiff’s 1 percent interest. Then Plaintiff, together with other members owning 49 percent of the membership interests in the LLC—for a total of 50 percent—voted to dissolve the LLC.   The issue on appeal is whether the vote to dissolve the LLC extinguished the right Defendants otherwise would have had to purchase Plaintiff’s 1 percent interest and avoid dissolution of the LLC. The Second Appellate District concluded, in accordance with the plain language of section 17707.01, that the answer is “yes,” and the vote of 50 percent of the LLC membership interests to dissolve the LLC must be given effect. Consequently, the court held that the trial court erred when it issued an order appointing appraisers to determine the price Defendants must pay to purchase Plaintiff’s 1 percent membership interest. The court ordered the trial court to dismiss the buyout proceeding as moot and directed the parties to wind up the activities of the LLC. View "Friend of Camden v. Brandt" on Justia Law

Brothers and Sisters in Christ, LLC (BASIC) allege that Zazzle, Inc. sold a t-shirt that infringed on BASIC’s federal trademark. The district court granted Zazzle’s motion to dismiss for lack of personal jurisdiction. The Eighth Circuit affirmed. The court explained that BASIC bears the burden of establishing a prima facie showing of jurisdiction. Further, where the applicable federal statute, here the Lanham Act, does not authorize nationwide personal jurisdiction the existence of personal jurisdiction depends on the long-arm statute of the forum state and the federal Due Process Clause.   Here, the court looked to Zazzle’s contacts with Missouri related to BASIC’s claims. Aside from the single t-shirt sale, BASIC fails to allege a connection between Zazzle’s other contacts with Missouri and the underlying suit. BASIC does not allege that Zazzle’s other activities in Missouri involved trademark infringement or that Zazzle sold additional trademark-infringing goods into the state. Further, BASIC has not alleged that Zazzle took such purposeful, targeted action toward Missouri or Missouri consumers. Although Missouri has an interest in this litigation because the allegedly injured plaintiff is a Missouri company, the convenience of the parties is neutral, as Zazzle would be inconvenienced by litigation in Missouri and BASIC would likely be inconvenienced in an alternate forum. In sum, BASIC has failed to allege that Zazzle could reasonably anticipate being haled into court in Missouri. View "Brothers and Sisters in Christ v. Zazzle, Inc." on Justia Law