Justia Corporate Compliance Opinion Summaries

In 2011 UJC private jet charter services hired Plaintiff as a co-pilot. After altercations between Plaintiff, a woman, and male pilots, which Plaintiff perceived to constitute sexual harassment, Plaintiff wrote an email to UJC management. About three weeks later, Plaintiff’s employment was terminated. Plaintiff sued, alleging retaliation. Defendants’ answer stated that UJC had converted from a corporation to an LLC. Plaintiff did not amend her complaint. Defendants’ subsequent motions failed did not raise the issue of UJC’s identity. UJC’s CEO testified that he had received reports that Plaintiff had used her cell phone below 10,000 feet; that once Plaintiff became intoxicated and danced inappropriately at a bar while in Atlantic City for work; that Plaintiff had once dangerously performed a turning maneuver; and that Plaintiff had a habit of unnecessarily executing “max performance” climbs. There was testimony that UJC’s male pilots often engaged the same behavior. The jury awarded her $70,250.00 in compensatory and $100,000.00 in punitive damages. When Plaintiff attempted to collect on her judgment, she was told that the corporation was out of business without assets, but was offered a settlement of $125,000.00. The court entered a new judgment listing the LLC as the defendant, noting that UJC’s filings and witnesses substantially added to confusion regarding UJC’s corporate form and that the LLC defended the lawsuit as though it were the real party in interest. The Sixth Circuit affirmed, stating it was unlikely that UJC would have offered a generous settlement had it genuinely believed itself to be a victim of circumstance, or that it would be deprived of due process by an amendment to the judgment; the response indicated a litigation strategy based on “roll[ing] the dice at trial and then hid[ing] behind a change in corporate structure when it comes time to collect.” View "Braun v. Ultimate Jetcharters, LLC" on Justia Law

The Internal Revenue Service denied Wells Fargo’s claims for refunds based on interest-netting under 26 U.S.C. 6621(d) between interest on tax underpayments and interest on tax overpayments. Section 6621(d) reads: To the extent that, for any period, interest is payable under subchapter A and allowable under subchapter B on equivalent underpayments and overpayments by the same taxpayer of tax imposed by this title, the net rate of interest under this section on such amounts shall be zero for such period. Absent an interest-netting provision , a taxpayer might make equivalent underpayments and overpayments yet owe the IRS interest because corporate taxpayers pay underpayment interest at a higher rate than the IRS pays overpayment interest. The Claims Court granted Wells Fargo partial summary judgment, finding that it satisfied the “same taxpayer” requirement, although the current embodiment of the company is the result of seven mergers. The companies involved in these mergers made tax underpayments and overpayments. The Federal Circuit identified three merger “situations” and concluded that two qualified for interest netting and one did not. The situations involved consideration of the whether the entities had separate identities at the time of the payments at issue and the amount of change in the entity’s identity as a result of the merger. View "Wells Fargo & Co. v. United States" on Justia Law

HMC was a shipping and shipyard services company, whose president was Hannah. HMC had a collective bargaining agreement with the mechanics union that required it to make contributions to the union’s pension fund to finance pensions for HMC’s employees. Hannah’s son, Mark, formed FCG, which bought the assets of HMC. No significant liabilities of HMC were explicitly transferred to FCG, which tried to negotiate its own collective bargaining agreement with the union. When HMC employees voted to decertify the union in 2009. the pension fund assessed withdrawal liability under the Multiemployer Pension Plan Amendments Act, 29 U.S.C. 1381. HMC had become insolvent, so the fund sought to impose HMC’s liability to the fund on FCG as HMC’s successor. The district court entered summary judgment in favor of FCG. The Seventh Circuit reversed in part, stating that lack of evidence that Mark knew about the pension fund and the possibility of withdrawal liability cannot excuse that liability. The court stated that fraudulent intent, while a factor in deciding whether there is alter ego liability, is not necessarily an essential factor, so summary judgment on a theory of successor liability was premature. View "Bd. of Trs. of the Auto. Mechs' Local v. Full Circle Group, Inc." on Justia Law

Shareholders of Diablo Controls submitted a written demand to inspect Diablo’s accounting books and records; the minutes of proceedings of shareholders, the board, and committees of the board; and certain other records. The demand requested the inspection take place at Diablo’s California office. The requested records were located in a Diablo office in Illinois. Diablo shipped records to California and made them available for inspection at its counsel’s California office. The shareholder found those records to be incomplete and sought a writ of mandate, claiming violation of Corporations Code section 1601. After the petition was filed, Diablo mailed the shareholders copies of additional records and made other records available for inspection at its counsel’s California office. The shareholders claimed the records were still incomplete. Diablo argued that section 1601 only obligated it to make the records available for inspection at its Illinois office. The trial court agreed and dismissed the action. The court of appeal affirmed; section 1601 requires that the records be made available for inspection at the office where such records are kept, even if the office is out of state. View "Innes v. Diablo Controls, Inc." on Justia Law

Caris Life Sciences, Inc. operated three business units: Caris Diagnostics, TargetNow and Casrisome. The Diagnostics unit was consistently profitable. TargetNow generated revenue but not profits, and Carisome was in the developmental stage. To secure financing for TargetNow and Carisome, Caris sold Caris Diagnostics to Miraca Holdings. The transaction was structured using a "spin/merge" structure: Caris transferred ownership of TargetNow and Carisome to a new subsidiary, then spun off that subsidiary to its stockholders. Owning only Caris Diagnostics, Caris merged with a wholly owned subsidiary of Miraca. Plaintiff Kurt Fox sued on behalf of a class of option holders of Caris. Fox alleged that Caris breached the terms of the Stock Incentive Plan because members of management as Plan Administrator, rather than the Board of Directors, determined how much the option holders would receive. Regardless of who made the determination, the $0.61 per share attributed to the spun off company was not a good faith determination, and resulted from an arbitrary and capricious process. The Court of Chancery found that fair market value was not determined, and the value received by the option holders was not determined in good faith and that the ultimate value per option was determined through a process that was "arbitrary and capricious." Caris appealed, arguing the Court of Chancery erred in arriving at its judgment. Finding no reversible error in the Court of Chancery's judgment, the Delaware Supreme Court affirmed. View "CDX Holdings, Inc. v. Fox" on Justia Law

Plaintiff filed suit under Sarbanes-Oxley, 18 U.S.C. 1514A(a)(1)(C), and Dodd-Frank, 15 U.S.C. 78u-6(h)(1)(A)(iii), after Oracle terminated his employment in retaliation for reporting that Oracle was falsely projecting sales revenues. The district court granted summary judgment to Oracle. The court joined the Second, Third, and Sixth Circuits and adopted the "reasonable belief" standard in Sylvester v. Parexel Int’l LLC standard, rejecting Platone v. FLYI, Inc.'s "definite and specific" standard, in determining that the employee must simply prove that a reasonable person in the same factual circumstances with the same training and experience would believe that the employer violated securities laws. Under the Sylvester standard, the court concluded that plaintiff's belief that Oracle was defrauding its investors was objectively unreasonable where missed projections by no more than $10 million are minor discrepancies to a company that annually generates billions of dollars. The court also concluded that plaintiff's claim under Dodd-Frank fails because he did not make a disclosure protected under Sarbanes-Oxley. Accordingly, the court affirmed the judgment. View "Beacom v. Oracle America, Inc." on Justia Law

Plaintiffs sued Sugar Rock, seeking a dissolution of partnerships, alleging them to be mining partnerships and attempted to obtain class action status. The circuit court granted plaintiffs partial summary judgment, finding that the partnerships should be dissolved, and appointed a special receiver and a distribution company to achieve that result. The Supreme Court of Appeals reversed, finding genuine issues of material fact and questions of law regarding the type of partnerships involved in the case, the parties who are the partners thereof, whether the partnerships’ property includes leases, and whether the procedural requirements for a decree of dissolution have been satisfied. View "Sugar Rock, Inc. v. Washburn" on Justia Law

Wanooka Farms, Inc. was a closely held family farming corporation. During the course of negotiations over the a split of the corporation (to avoid certain tax consequences), two appraisals were done. The appeal before the Supreme Court in this matter was an appeal of a bench trial in which the district court found that the fair value of shares in Wanooka equaled $3,344 per share. Finding no reversible error in the trial court's finding, the Supreme Court affirmed. View "Wagner v. Wagner" on Justia Law

In 1998 IGF bought Continental’s crop-insurance business at a price to be determined at either side’s option by the exercise of a put or call. In 2001 Continental exercised its put option; under the contractual formula, IGF owed Continental $25.4 million. Around that same time, IGF sold its business to Acceptance for $40 million. The Symons, who controlled IGF, structured the purchase price: $16.5 million to IGF; $9 million to IGF's parent companies Symons International and Goran in exchange for noncompetition agreements; and $15 million to Granite, an affiliated Symons-controlled company, for a reinsurance treaty. Continental, still unpaid, sued for breach of contract and fraudulent transfer. The court found for Continental and pierced the corporate veil to impose liability on the controlling companies and individuals. The Seventh Circuit affirmed, finding Symons International liable for breach of the 1998 sale agreement; Symons International, Goran, Granite, and the Symons liable as transferees under the Indiana Uniform False Transfer Act; and the Symons liable under an alter-ego theory. The Symons businesses observed corporate formalities only in their most basic sense. The noncompetes only made sense as a fraudulent diversion of the purchase money, not as legitimate protection from competition. The reinsurance treaty. which was suggested bySymons and outside industry norms, was unjustified and overpriced. View "Cont'l Cas. Co. v. Symons" on Justia Law

Corporate citizens of Delaware, Nebraska, and Illinois, sued Americold, a “real estate investment trust” organized under Maryland law, in a Kansas court. Americold removed the suit based on diversity jurisdiction, 28 U.S.C. 1332(a)(1), 1441(b). The federal court accepted jurisdiction and ruled in Americold’s favor. The Tenth Circuit held that the district court lacked jurisdiction. The Supreme Court affirmed. For purposes of diversity jurisdiction, Americold’s citizenship is based on the citizenship of its members, which include its shareholders. Historically, the relevant citizens for jurisdictional purposes in a suit involving a “mere legal entity” were that entity’s “members,” or the “real persons who come into court” in the entity’s name. Except for that limited exception of jurisdictional citizenship for corporations, diversity jurisdiction in a suit by or against the entity depends on the citizenship of all its members, including shareholders. The Court rejected an argument that anything called a “trust” possesses the citizenship of its trustees alone; Americold confused the traditional trust with the variety of unincorporated entities that many states have given the “trust” label. Under Maryland law, the real estate investment trust at issue is treated as a “separate legal entity” that can sue or be sued. View "Americold Realty Trust v. ConAgra Foods, Inc." on Justia Law