Slone v. Commissioner of Internal Revenue
(United States Ninth Circuit) - Held that shareholders were liable for taxes on proceeds from the sale of a close corporation. The Internal Revenue Service sued the shareholders, claiming they violated Arizona's Uniform Fraudulent Transfer Act by engaging in a complex series of stock and asset transactions that resulted in creating a debtor company unable to pay the tax bill. Agreeing with the IRS's position, the Ninth Circuit reversed a decision of the Tax Court and remanded with instructions to enter judgment in favor of the IRS.
Tindall v. First Solar Inc.
(United States Ninth Circuit) - Affirming the district court's dismissal of a shareholder derivative action for failure to show demand futility in a suit where shareholders of a company who brought suit for breach of fiduciary duties for failing to disclose manufacturing and design defects in the company's solar panels without making a demand to the board.
Bushansky v. Shoon-Shiong
(California Court of Appeal) - Affirming the dismissal of a shareholder derivative action filed in California because the forum selection provision on the company's certificate of incorporation designated Delaware as the forum for shareholder derivative actions.
The Police Retirement System of St. Louis v. Page
(California Court of Appeal) - Affirming the grant of summary judgment to Google executives in a suit brought by three shareholders bringing derivative suits alleging the corporation was harmed by executives who agreed to refrain from actively recruiting employees working for competitors, an arrangement that had been previously abandoned when it gave rise to antitrust issues with the Department of Justice, because the claim was barred by the three-year statute of limitations.
ITV Gurney Holding, Inc. v. Gurney
(California Court of Appeal) - Reversing the trial court's order reinstating the Gurneys, the producers of Duck Dynasty, to positions managing the day-to-day operations of the plaintiff company that they once owned and are the minority owners of, who had been fired from their roles as CEOs and removed from management, because the very operating agreement the Gurneys said gave them authority to manage actually gave the company, through its board, the ultimate authority and allowed them to remove the Gurneys from management, but affirming the preliminary injunction allowing them to continue as board members and barring the company from infringing their rights in that position.
In Re Irving Tanning Company
(United States First Circuit) - Affirming bankruptcy court and district court rulings that a transaction involving the debt-financed purchase of a family owned leather manufacturer was not a fraudulent conveyance and did not amount to a violation of the fiduciary duties of the company's directors because the factual determinations were not clearly erroneous and supported the court's conclusions.
Central Laborers Pension Fund v. McAfee, Inc.
(California Court of Appeal) - Affirming the trial court's summary judgment as to nine outside directors of McAfee in a class action corporate malfeasance case relating to the company's merger with Intel in which former public shareholders alleged an unfair process contaminated by conflicts that resulted in an undervalued price at sale, but reversing the judgment as to the former CEO and the corporate defendants
In Re Walldesign
(United States Ninth Circuit) - Affirming the district court's order reversing the bankruptcy order that would have let a committee of unsecured creditors could recover fraudulently transferred funds solely from a corporate cheat because the appellate court agreed with the district court that the committee could also recover funds from the parties to whom the cheat made payments from the corporate account because the 'good guys' involved in these dealings were still in a better position than unsuspecting creditors to guard against corporate fraud.
Applied Medical Corporation v. Thomas
(California Court of Appeal) - In a corporate governance action, arising from plaintiff corporation's suit over the exercise of its right to repurchase shares of its stock, given to defendant under a stock incentive plan for outside directors on its board, the trial court's grant of summary judgment to defendant is: 1) reversed because plaintiff's conversion claim could be based on either ownership or the right to possession at the time of conversion; and 2) affirmed because plaintiff's fraud claims were not timely under either the discovery rule or relation back doctrine, and thus barred by the statute of limitations.
Stein v. AXIS Ins. Co.
(California Court of Appeal) - In an action against two insurance companies, brought by a plaintiff-insured who was denied coverage under a D&O policy because he was convicted of securities fraud, the trial court's judgment sustaining defendants' demurrer and dismissing the complaint is: 1) affirmed in part where the AXIS demurrer was properly sustained because AXIS was a stranger to the HCC policy and owed no duties connected with it; but 2) reversed in part where the HCC demurrer was improperly sustained because when a policy expressly provides coverage for litigation expenses on appeal, an exclusion requiring repayment to the insurer upon a 'final determination' of the insured's culpability applies only after the insured's direct appeals have been exhausted.
Sheley v. Harrop
(California Court of Appeal) - In a dispute involving the control of a pest control company started by decedent, asserting causes of action to recover damages for conversion, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty based on actions taken by defendant (decedent's wife) in cooperation with the decedent, the trial court granted of defendant's anti-SLAPP motion as to plaintiff's intentional infliction of emotional distress claim is: 1) modified by granting defendants' motion to strike the specific claims founded on allegations of protected activity in each remaining cause of action in the cross-complaint; and 2) otherwise affirmed as modified.
Western Surety Co. v. La Cumbre Office
(California Court of Appeal) - In an action for breach of an indemnity agreement, the trial court's grant of summary judgment requiring defendant to pay plaintiff approximately $6.07 million pursuant to the indemnity agreement is affirmed where although the signatory did not have actual authority to execute the indemnity agreement on defendant's behalf, in these circumstances, the person's signature binds defendant pursuant to former Corporations Code section 17157(d) (now section 17703.01(d)), provided that the other party to the agreement does not have actual knowledge of the person's lack of authority to execute the agreement on behalf of defendant.
Trikona Advisers Limited v. Chugh
(California Court of Appeal) - In a complaint alleging breach of fiduciary duty by defendant, a former partner and fifty percent owner of plaintiff corporation, the district court's grant of summary judgment to defendants is affirmed over plaintiff's meritless arguments that: 1) the district court incorrectly applied the doctrine of collateral estoppel; and 2) Chapter 15 of the United States Bankruptcy Code prevents the district court from giving preclusive effect to the Cayman court's factual findings.
Trikona Advisers Limited v. Chugh
(United States Second Circuit) - In a complaint alleging breach of fiduciary duty by defendant, a former partner and fifty percent owner of plaintiff corporation, the district court's grant of summary judgment to defendants is affirmed over plaintiff's meritless arguments that: 1) the district court incorrectly applied the doctrine of collateral estoppel; and 2) Chapter 15 of the United States Bankruptcy Code prevents the district court from giving preclusive effect to the Cayman court's factual findings.
Bradley v. ARIAD Pharms., Inc.
(United States First Circuit) - In an investor suit against the company and four corporate officers, following a drop in the share price of the company, alleging securities fraud in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. sections 78j(b) and 78t(a), as well as the Securities and Exchange Commission's (SEC) Rule 10b-5, 17 C.F.R. section 240.10b-5, the district court's judgment is: 1) affirmed as to the dismissal of the securities fraud counts, except with respect to one particular alleged misstatement for which we find the allegations set forth in the complaint sufficient to state a claim; and 2) affirmed as to the disposition of the plaintiffs' claims under Sections 11 and 15, albeit on different grounds than those articulated by the district court.
US Sec. & Exchange Comm'n v. Jensen
(United States Ninth Circuit) - In an enforcement action filed by the Securities and Exchange Commission (SEC) alleging that the defendants participated in a scheme to defraud investors by reporting millions of dollars in revenue that were never realized, the District Court's judgment in favor of defendant-corporate officers is vacated where: 1) Rule 13a-14 of the Securities Exchange Act provided the SEC with a cause of action not only against Chief Executive Officers and Chief Financial Officers who did not file the required certifications, but also against CEOs and CFOs who certified false or misleading statements; and 2) the disgorgement remedy authorized under Section 304 of the Sarbanes-Oxley Act applied regardless of whether a restatement was caused by the personal misconduct of an issuer's CEO and CFO or by other issuer misconduct.
Louisiana Municipal Police Employees' Retirement Sys. v. Wynn
(United States Ninth Circuit) - In a shareholder derivative lawsuit alleging that casino resort board of director defendants breached their fiduciary duties, the District Court's dismissal under Fed. R. Civ. P. 23.1 is affirmed where: 1) diversity jurisdiction under 28 U.S.C. section 1332(a)(2) was improper because there were American citizens on both sides of the case; 2) the district court did not abuse its discretion in determining that the shareholders failed to comply with Rule 23.1 or state law governing demand futility; and 3) there was no reversible error if the district court considered materials extraneous to the complaint.
Rodriguez-Miranda v. Benin
(United States First Circuit) - In another appeal in a protracted employment dispute between two former colleagues in which plaintiff sought payment of his promised wages and loan money, the District Court's decision to use Federal Rule of Civil Procedure 25(c) to hold defendant and related entities liable for the judgment originally entered against defendant's company only is affirmed where the District Court did not plainly err in joining related entities as alter egos of defendant's company and holding them liable for the judgment entered in favor of plaintiff.
US v. Gabinskaya
(United States Second Circuit) - Conviction of various fraud and conspiracy charges arising out of defendant's involvement in a conspiracy to defraud insurance companies in connection with claims under New York's No Fault Comprehensive Motor Vehicle Insurance Reparation Act, N.Y. Ins. Law section 5102 et seq., which requires that a medical services professional corporation providing treatment under the Act be owned by a licensed physician, is affirmed over defendant's claims that she was the owner of the professional corporation, where New York law is clear that ownership for purposes of the No Fault statute means more than mere paper ownership and that factors beyond formal indicia of ownership may be considered by a fact-finder in determining ownership under New York's no-fault insurance laws.
Alphonse Hotel Corporation v. Tran
(United States Second Circuit) - In an action concerning a property lease and a purported joint venture agreement entered into between a son and his father, the now-deceased former president and majority shareholder of a real estate development corporation, seeking damages for the son's use and occupancy of the property and a judgment declaring that the lease and joint venture agreement were void, the District Court's rulings denying the son's discovery requests and granting summary judgment to corporate-plaintiff are affirmed where: 1) the lease was void as a gift or act of corporate waste; and 2) the parol evidence rule applies in this case and the integration clause in the lease retains its preclusive effect, thus the purported joint venture agreement is unenforceable.
Mosier v. Stonefield Josephson, Inc.
(United States Ninth Circuit) - In a tort action brought by a court-appointed receiver against defendant accountants who audited the financial statements of PEMGroup, whose former directors and managers defrauded $950 million from investors, the district court's grant of summary judgment to defendants is affirmed where the receiver failed to raise a genuine issues as to causation by failing to show that the involved companies or its investors relied on the audits at issue.
Schiffmann v. US
(United States First Circuit) - In an appeal by corporate officers found to be personally responsible for causing their corporation to shirk its payroll tax obligations, the district court grant of summary judgment to the government is affirmed where: 1) there is no genuine issue as to any material fact; and 2) both plaintiffs were responsible persons during the relevant quarters, and each of them acted wilfully in failing to see to the payment of the corporation's overdue and current trust fund taxes.
Espinoza v. Dimon
(United States Second Circuit) - In a derivative action against JPMorgan Chase & Co., alleging that the company's board wrongfully refused to investigate misstatements made by corporate executives regarding the "London Whale" trading incident, the district court's dismissal is affirmed where plaintiff failed to meet the burden to please sufficient facts to rebut the strong presumption that the board's decision was valid under the business judgment rule.
Behm v. Clear View Technologies
(California Court of Appeal) - In an action against officers and directors of a company in which plaintiff invested, alleging false representations, following a default judgment for plaintiff, the trial court's grant of defendant's motion to vacate the default judgment on grounds that it did not have sufficient notice of punitive damages under Code of Civil Procedure section 435.115(f) and that it was entitled to mandatory relief under section 473(b), is affirmed where: 1) due process requires that when a plaintiff moves for discovery terminating sanctions and seeks punitive damages, a statement under section 425.111(f) must be served a reasonable time before obtaining those sanctions; and 2) notice must be sufficient to afford a defendant the opportunity to fairly appraise the full amount of damages sought by the time he or she needs to respond and oppose the motion.
US v. Nagle
(United States Third Circuit) - Co-defendants' convictions related to a scheme to fraudulently bid for Pennsylvania transportation projects as a disadvantaged business enterprise is affirmed where a shareholder lacks a reasonable expectation of privacy to challenge the search of corporate property unless he has shown a personal connection to the places searched and materials seized. Sentences are vacated and remanded for resentencing where the amount of loss defendants are responsible for is the face value of the contracts minus the fair market value of their services rendered instead of the face value of the fraudulently procured contracts.
Trinity Wall Street v. WalMart Stores Inc.
(United States Third Circuit) - In a suit brought by a shareholder of retailer-defendant, seeking to include its proposal in defendant's proxy materials for shareholder consideration, the district court's judgment in favor of plaintiff ordering the inclusion of the proposal into the proxy materials is reversed where the proposal, which goes to the heart of defendant's business, is excludable under the "ordinary business" exclusion of SEC Rule 14a-8(i)(7), 17 C.F.R. section 240.14a-8(i)(7).
Sarnacki v. Golden
(United States First Circuit) - In this shareholder derivate suit, plaintiff Sarnacki asserts Nevada state-law claim against Smith & Wesson's officers and directors, including breach of fiduciary duties, wastes of corporate assets, and unjust enrichment. In reaction to earlier and parallel cases, Smith & Wesson's Board formed a Special Litigation Committee (SLC) to investigate and determine the viability of any of these claims and to make a recommendation to the Board whether to pursue any of these claims. The SLC recommended against filing any claims. The district court granted defendant's motion for summary dismissal on the basis of the SLC recommendation, and after limited discovery. The judgment is affirmed, where: 1) the Board has met its burden as to proving the independence of the SLC; 2) the SLC's investigation was reasonable and in good faith; and 3) the district court's decision to limit discovery was not an abuse of the court's discretion, as it was adequate to aid its review.
Meister v. Mensinger
(California Court of Appeal) - In this action, plaintiff-shareholders of Sesame Technologies, Inc. allege that defendants colluded to secure a preferential sale of Sesame's assets and business to company ExtraView, thus violating their fiduciary duties to plaintiffs. Judgement in favor of defendants is reversed and remanded for a new trial limited to the issue of remedies, where: 1) the trial court erred in failing to craft an appropriate remedy; and 2) the trial court erred in failing to conduct its own in camera review of financial documents.
Rosenbloom v. Pyott
(United States Ninth Circuit) - In this derivative action brought by plaintiff-shareholders against defendant-directors of company Allergan, alleging that defendants are liable for violations of various state and federal law as well as for breaches of their fiduciary duties to Allergan, dismissal on the pleadings is reversed, where: 1) though plaintiffs did not first make a demand on defendants requesting that Allergan bring the derivative claims in its own name, their particularized allegations establish a reasonable doubt as to whether defendants face a substantial likelihood of liability and as to whether defendants are protected by the business judgment rule; and 2) accordingly, the demand requirement is excused.
MAZ Partners LP v. PHC, Inc.
(United States First Circuit) - Summary judgment in favor of defendant in a class action brought by plaintiff-stockholders challenging the fairness of a corporate merger is vacated and remanded, where: 1) the district court erred in granting summary judgment in light of plaintiffs' Affidavit outlining the discovery they needed to respond to the dispositive motion; and 2) plaintiffs should have been afforded the opportunity to conduct additional discovery.
Tatum v. RJR Pension Investment Committee
(United States Fourth Circuit) - In a class action brought on behalf of plaintiff and other participants in defendant-employer's 401(k) retirement savings plan alleging that defendant-employer breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA) when it liquidated two funds held by the plan on an arbitrary timeline without conducting a thorough investigation, thereby causing a substantial loss to the plan, judgment for defendant is: 1) affirmed in part, where the district court properly concluded that defendant-employer breached its duty of procedural prudence and therefore bore the burden of proof as to causation; but 2) reversed in part and remanded, where the district court then failed to apply the correct legal standard in assessing defendant-employer's liability.
Schussel v. Werfel
(United States First Circuit) - The decision of the United States Tax Court holding petitioner liable, as the recipient of a fraudulent transfer from his former company, for the company's back taxes of over $4.9 million, plus interest of at least $8.7 million, is: 1) reversed in part and remanded, where the tax court calculated prejudgment interest under the wrong statute, which should have been determined in accord with Massachusetts law, and under Massachusetts law, no interest would have begun to accrue until the date of the Notice of Liability; but 2) affirmed in part, where petitioner's loans to his former company to pay petitioner's litigation expenses did not reduce the net amount transferred to him.
In re: Thelen LLP
(Court of Appeals of New York) - In response to the certified question from the United States Court of Appeals for the Second Circuit: 1) for purposes of administering a related bankruptcy, a dissolved law firm's pending hourly fee matters are not partnership "property" or "unfinished business" within the meaning of New York's Partnership Law; and 2) a law firm does not own a client or an engagement, and is only entitled to be paid for services actually rendered.
Freedman v. Redstone
(United States Third Circuit) - Dismissal of a shareholder action alleging that defendant Board of Directors and the individual members failed to comply with its 2007 plan which would render tax deductible certain incentive compensation paid to the company's executives, which allegedly resulted in the payment of more than $36 million of excess compensation, is affirmed, where: 1) with regard to the derivative suit, plaintiff did not make a pre-suit demand to the Board of Directors or present sufficient allegations explaining why a demand would have been futile; and 2) with regard to the direct suit, federal tax law does not confer voting rights on shareholders not otherwise authorized to vote or affect long-settled Delaware corporation law which permits corporations to issue shares without voting rights, so plaintiff's contention regarding defendant-company's issuance of non-voting shares fails to state a claim on which relief may be granted.
Feldman v. Law Enforcement Associates
(United States Fourth Circuit) - Summary judgment in favor of defendants on plaintiff's claims that he was unlawfully terminated from his employment in retaliation for protected activity under the Sarbanes-Oxley Act of 2002 is affirmed, where plaintiff failed to sufficiently establish that his alleged protected activities were a contributing factor to his termination.
American Master Lease v. Idanta Partners
(California Court of Appeal) - In an action in which plaintiff alleges that defendants aided and abetted a breach of fiduciary duty, the trial court's judgment for plaintiff and an order denying defendants' motion for judgment notwithstanding the verdict is 1) affirmed in part, where: (a) a defendant can be liable for aiding and abetting breach of fiduciary duty without owing the plaintiff a fiduciary duty; (b) the statute of limitations for aiding and abetting breach of fiduciary duty is three or four years depending whether the breach is fraudulent or non-fraudulent; (c) the restitutionary remedy of disgorgement is available for aiding and abetting breach of fiduciary duty; and (d) the measure of restitution for aiding and abetting breach of fiduciary duty is the net profit attributable to the wrong; but 2) reversed in part and remanded, where defendants are entitled to a new trial on the amount of defendants' unjust enrichment. (Opinion on Rehearing)
Lawson v. FMR LLC
(United States Supreme Court) - The whistleblower protection provisions of the Sarbanes-Oxley Act of 2002 contained in 18 U. S. C. section 1514A include employees of a public company's private contractors and subcontractors when they report covered forms of fraud.
SEC v. Teo
(United States Third Circuit) - Judgment finding defendants were liable for violating the Securities Exchange Act of 1934, and ordering defendants to disgorge over $17 million, plus prejudgment interest amounting to over $14 million is affirmed, where: 1) the district court did not abuse its discretion by admitting defendant Teo's guilty plea allocution; 2) there was sufficient evidence to prove a "plans and proposals" theory of liability; and 3) the district court did not abuse its discretion in ordering disgorgement, including prejudgment interest.
Steginsky v. Xcelera Inc.
(United States Second Circuit) - Dismissal of plaintiff-former minority shareholder's securities fraud claims alleging that defendant-insiders purchased stock by making a tender offer through a shell corporation without disclosing any information about defendant-company's financial state, is: 1) vacated as to the dismissal of plaintiff's insider trading claims under sections 10(b), 20(a), and 20A(a) of the Securities Exchange Act, and of her pendent non-federal claims for breach of fiduciary duty, where the duty of corporate insiders to either disclose material non-public information or abstain from trading is defined by federal common law and applies to unregistered securities, and therefore, the district court erred in dismissing plaintiff's insider trading claims; but 2) affirmed as to the dismissal of her market manipulation claims, and of her insider trading claims under section 14(e) of the Securities Exchange Act.
Apex LLC v. Korusfood.com
(California Court of Appeal) - The trial court's order granting plaintiff's motion for attorney fees incurred in a prior appeal is affirmed, where: 1) the order granting plaintiff's motion for attorney fees is directly appealable under the collateral order doctrine; and 2) the trial court did not err by awarding attorney fees against defendant because substantial evidence supported a finding that defendant stepped into the shoes of its predecessors the parties to the credit applications that included the attorney fees provision on which the award of attorney fees was based.
Busse v. United Panam Financial Corp.
(California Court of Appeal) - Dismissal of an action brought by plaintiff-minority shareholders for "rescissionary damages" based on breach of fiduciary duty by defendants with respect to a proposed buyout of defendant-company, is: 1) affirmed in part, where under Corporations Code section 1312(b), in common control situations, dissenting minority shareholders have the remedy of appraisal unless they elect the remedy of stopping or rescinding the reorganization but they do not have any right to sue for damages for breach of fiduciary duty; but 2) reversed in part and remanded, where plaintiffs have never withdrawn their alternative request to set aside the merger.
Asahi Kasei Pharma Corp. v. Actelion Ltd.
(California Court of Appeal) - Judgment for plaintiff in an action alleging intentional interference with a License Agreement, interference with plaintiff's prospective economic advantage, breach of a confidentiality agreement, and breach of confidence, arising out of defendant Actelion's notice to plaintiff that following its acquisition of defendant CoTherix, defendant Co-Therix's would discontinue development of plaintiff's drug for "business and commercial reasons," is affirmed, where: 1) defendant Actelion, by virtue of its ownership interest, is not automatically immune from tortious interference with the License Agreement; 2) the jury was properly instructed on the elements of wrongful interference with contract and properly charged with considering whether defendants "used unlawful means to interfere with the License Agreement;" and 3) the manager's privilege does not exempt a manager from liability when he or she tortiously interferes with a contract or relationship between third parties.
Guippone v. BH S&B Holdings LLC
(United States Second Circuit) - Dismissal of plaintiff's putative class action claim brought against defendants for alleged violations of the Worker Adjustment Retraining and Notification Act (WARN) is: 1) affirmed in part, where the district court correctly determined the private equity defendants were investors, not "single employers" with their subsidiary within the meaning of WARN, and thus were properly dismissed; and 2) vacated in part and remanded, where the district court erred in granting summary judgment to defendant BHY S&B HoldCo, LLC, which operated the entity plaintiff worked for, because plaintiff raised a question of material fact as to whether defendant BHY S&B HoldCo, LLC was a single employer with BH S&B Holdings LLC.
US v. Woods
(United States Supreme Court) - The Fifth Circuit Court of Appeal's affirmation of the district court's holding that defendants' partnerships were properly disregarded as shams but that the valuation-misstatement penalty did not apply, is reversed, where: 1) the district court had jurisdiction to determine whether the partnerships' lack of economic substance could justify imposing a valuation-misstatement penalty on the partners; and 2) the penalty is applicable to tax underpayments resulting from the defendant-partners' participation in the COBRA tax shelter.