Justia Corporate Compliance Opinion Summaries

The Pennsylvania Supreme Court accepted certification from the United States Court of Appeals for the Third Circuit to address the exclusiveness of a statutory appraisal remedy provided to minority shareholders in certain merger scenarios under Pennsylvania corporate law. Where there is a fair value dispute, the BCL provides for post-merger judicial valuation or appraisal of the shares. Mitchell Partners, L.P., was a minority shareholder of Irex Corporation. In 2006, Irex participated in a merger structured so that some minority shareholders would be "cashed out" and would not receive an equity interest in the surviving corporation, a wholly owned subsidiary of North Lime Holdings Corporation. Mitchell objected to the acquisition. The merger proceeded nonetheless, and Irex commenced valuation proceedings in state court to address the dispute with Mitchell. Meanwhile, Mitchell pursued common law remedies in a diversity action in federal court, naming as defendants Irex, its directors, most of its officers, and North Lime. The defendants sought dismissal on the ground that, under Section 1105 of the BCL, judicial valuation was the sole remedy available to dissenting shareholders in the post-merger timeframe. A divided three-judge panel of the Third Circuit reversed the superior court in favor of Mitchell. Defendants sought rehearing, and the Governor of Pennsylvania and several business groups moved for leave to file supportive amicus briefs. The Governor expressed particular concern that the Third Circuit had interpreted the BCL's provisions relating to dissenting shareholders' rights in a manner inconsistent with Commonwealth case law. Accordingly, he urged the Third Circuit to grant rehearing and certify a question of law to the Supreme Court. Upon review, the Supreme Court, in response to the certified question, Section 1105 (of the BCL) "precludes postmerger remedies other than appraisal only in the absence of fraud or fundamental unfairness."View "Mitchell Partners, L.P., Aplt v. IREX Corporation" on Justia Law

In a derivative action on behalf of Hewlett-Packard Company, plaintiff accused certain HP directors of committing waste and breaching the duty of care in connection with the August 2010 termination of then-CEO, Hurd. Plaintiff contends that Hurd was not entitled to, and did not deserve, any severance upon his termination but that the directors granted Hurd a severance package estimated to be worth $40 million or more. Plaintiff also challenged the lack of a long term CEO succession plan as a breach of the directors’ duty of care. The chancellor dismissed. Under Rule 23.1, a stockholder must either make a demand on the board to instigate the legal action that the stockholder seeks to bring on the corporation’s behalf or allege with particularity why such a demand is excused. Plaintiff did not to make a presuit demand and did not adequately allege a basis to excuse presuit demand.View "Zucker v. Andreessen" on Justia Law

A stockholder of Republic, a Delaware corporation that engages in waste hauling and waste disposal, filed a derivative suit based on Republic’s compensation decisions: that a payment to O’Connor was made without consideration and was, therefore, wasteful; that an incentive payment to O’Connor was wasteful because it was not tax-deductible and rendered Republic’s compensation plan not tax-deductible; that Directors paid themselves excessive compensation; that Directors breached their duty of loyalty and wasted corporate assets by awarding a certain type of stock option; and that Directors improperly awarded employee bonuses because the requirements of the bonus scheme under which the bonuses were awarded were not met. The chancellor dismissed all but the claim arising from the board’s granting itself stock awards.View "Frank David Seinfeld v. Donald W. Slager, et al." on Justia Law

In this appeal, the issue before the Supreme Court was whether a derivative complaint challenging a corporate board's decision to pay certain executive bonuses without adopting a plan that could make those bonuses tax deductible states a claim for waste. The trial court concluded that the complaint failed to allege with particularity, that the board's decision not to implement a so-called "Section 162(m)" plan was a decision that no reasonable person would have made. Upon review, the Supreme Court agreed and affirmed the trial court's decision. View "Freedman v. Adams, et al." on Justia Law

OCV supplies equipment and licenses software for in-room hotel entertainment and sought a judgment of $641,959.54 against Roti, the owner of companies (Markwell, now defunct) that owned hotels to which OCV provided services. The district judge granted summary judgment, piercing the corporate veil, but rejecting a fraud claim. The Seventh Circuit reversed. While the Markwell companies were under-funded, OCV failed to treat the companies as separate businesses and proceed accordingly in the bankruptcy proceedings of one of the companies and made no effort to determine the solvency of the companies. View "On Command Video Corp. v. Roti" on Justia Law

The Trustee filed this action against former directors and officers of Bancshares. The directors also all formerly served as the officers and directors of the Bank, a wholly owned subsidiary of Bancshares. The court held that the Trustee could pursue her claims only as to the directors' alleged improper subordination of Bancshares' LLC interest. Therefore, the court reversed and remanded the district court's judgment as to that claim, but affirmed its judgment in all other respects. Accordingly, the court held that the district court did not err in granting the directors' motion to dismiss except as to the claim for subordination of the LLC interest of Bancshares. View "Beach First National Bancshare v. Anderson" on Justia Law

National Elevator, lead plaintiff on behalf of investors who purchased VeriFone stock, appealed the dismissal of its securities fraud class action. National Elevator alleged that VeriFone, the CEO and former Chairman of the Board of Directors, and the company's former CFO and Executive Vice President, violated sections 10(b), 20(a), and 20A of the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), 78t-1(a), and 78t(a), and Securities and Exchange Commission Rule 10-b, 17 C.F.R. 240.10b-5(b), in connection with a December 2007 restatement of financial results. The court held that National Elevator adequately pleaded violations of section 10B and Rule 10b as to all defendants; its section 20A claim against the individual defendants was sufficiently pled; but the section 20(a) claim was properly dismissed. Accordingly, the court affirmed in part and dismissed in part. View "National Elevator Industry Pension Fund v. VeriFone Holdings, Inc., et al" on Justia Law

Carleton, LLC appealed a superior court order that denied its motion to vacate and set aside articles of dissolution filed by MTS Development Corporation (MTS) and that denied its renewed motion to enforce creditor status. At issue at trial was the valuation of Carleton, LLC's half ownership interest in MTS which Adrienne Balagur sought to acquire. After the trial court valued the ownership interest, Balagur moved to terminate Carleton, LLC's rights and status as a shareholder of MTS. The trial court granted this motion, and held that Carleton, LLC would be considered a creditor of MTS until it received money for the shares purchased. MTS then filed a notice of intention ot adopt article of dissolution. Carleton objected, moving to vacate or set aside the articles. Carleton argued that Adrienne Balagur's election to purchase Carleton's shares was irrevocable, and that the shareholders could not validly authorize the articles of dissolution. The trial court denied Carleton's motion, but agreed that an accounting of MTS' books and records should occur. On appeal, Carleton contended that the trial court erred in decision denying its motion and making it an MTS creditor. Finding no error, the Supreme Court affirmed the trial court's decision. View "Carleton, LLC v. Balagur" on Justia Law

In 2008 Robert Rude, then a sitting Cook Inlet Region, Inc. (CIRI) director, and three other candidates ran as an independent “New Alliance” slate for positions on the CIRI board of directors. Shortly before the election, CIRI filed suit, claiming that the New Alliance proxy materials contained materially misleading statements. Rude and his co-defendants counterclaimed, alleging that CIRI’s election procedures were unfairly tilted toward the interests of the current board and that the directors had improperly refused to disclose shareholder and corporate information to Rude and the other New Alliance candidates. The superior court granted summary judgment on all claims and counterclaims in favor of CIRI. As a result, the New Alliance proxies were voided, and Rude was not re-elected to the board. Rude appealed the rulings both on CIRI’s claims and his counterclaims. Although Rude’s claims were technically moot, the Supreme Court addressed them insofar as they potentially affected prevailing party status. Because no issue of material fact existed as to the claims at issue and because CIRI is entitled to judgment as a matter of law, the Supreme Court affirmed the superior court. In a separate appeal, Rude challenged four other rulings of the superior court: (1) the award of attorney’s fees to CIRI; (2) denial of his Rule 60(b) motion for relief from judgment; (3) the superior court’s exclusion of exhibits filed with that motion; and (4) dismissal of New Alliance as a party to this suit. Because the superior court did not abuse its discretion in any of these rulings, the Supreme Court affirmed the superior court in all respects. View "Rude v. Cook Inlet Region, Inc." on Justia Law

Plaintiff, both individually and as the trustee of several trusts that she directed, asserted claims against defendants arising out of her decision to invest in Lord Baltimore. Defendants moved to dismiss all of the claims asserted against them. The court held that defendants' motion to dismiss was granted, except to plaintiff's claim that there was an implied covenant in the Shareholders' Agreement requiring that repurchase proposals be presented to and considered by the Board, which was not dismissed. View "Blaustein v. Lord Baltimore Capital Corp." on Justia Law