Justia Corporate Compliance Opinion Summaries

In a shareholder derivative action brought in the name of Sunpower, plaintiff claimed that the directors and certain officers of SunPower breached their fiduciary duties by failing to implement or to monitor an effective internal control system, which caused the company to misstate, and then to restate, its financial statements for 2008 and 2009. That restatement also led to related actions in federal court accusing the company and its directors and senior management of violating federal securities laws (Securities Class Action). Plaintiffs sought indemnification for whatever losses the company ultimately incurred from the Securities Class Action and recovery of other damages directly caused by the restatement itself. Defendants moved to stay the derivative action pending resolution of the Securities Class Action. The court found that practical considerations made simultaneous prosecution of both cases unduly complicated, inefficient, and unnecessary. Therefore, the court granted defendant's motion to stay the derivative action.View "Brenner v. Albrecht, et al." on Justia Law

This matter involved a request for books and records under Section 220 of the Delaware General Corporation Law. Plaintiff owned stocked in the defendant corporation and was also a plaintiff in a California state plenary state derivative action, in which it alleged that the defendant directors were liable to the corporation for a breach of their fiduciary duties. Because of the unusual procedural posture of this case, which included statements by the California Court appearing to endorse this action, the court ordered certain records produced. Defendants made production and plaintiffs subsequently filed a motion to compel, arguing that the production was insufficient. The court found that the issue was moot because plaintiff failed to file a third amended complaint before defendants filed and the parties briefed, a demurrer to the second amended complaint in the California action, and because, to the extent plaintiff needed expedited action on this motion to compel in order to file a third amended complaint, it failed to seek it. Defendant's demurrer had been submitted to the California court, which had stated that there would be no amendments to the now-completed briefing and that the second amended complaint would stand or fall with prejudice. Therefore, plaintiff no longer had a proper purpose.View "Amalgamated Bank v. NetApp, Inc." on Justia Law

Plaintiff, a former corporate officer, sued defendant, his former employer, for advancement and indemnification in connection with several proceedings that arose out of regulatory and criminal investigations at the defendant corporation following defendant's distribution of oversized morphine sulfate tablets into the market. The dispute centered around whether plaintiff succeeded on the merits of any of the proceedings at issue, thus entitling him to indemnification as a matter of law, or whether additional discovery was required to determine whether plaintiff acted in good faith, in which case he would be entitled to indemnification under the Indemnification Agreement. The court found that plaintiff was not entitled to advancement for the Jail Records Matter; was not entitled to mandatory indemnification for the Criminal Matter or the HHS Exclusion Matter; was entitled to mandatory indemnification for the FDA Consent Decree Matter; and that the evidence relevant to plaintiff's claims for permissive identification was limited to plaintiff's conduct, and the facts related to that conduct, underlying the proceedings for which indemnification was sought.View "Hermelin v. K-V Pharmaceutical Co." on Justia Law

This action involved claims by plaintiffs (Paron and, together with McConnon and Lyons) against defendant. McConnon, Lyons, and defendant co-founded Paron to manage client accounts using a software-based futures trading strategy defendant had developed. Plaintiffs accused defendant of fabricating records and making other false statements concerning the trade software, fraudulently inducing McConnon and Lyons to form Paron, and breaching fiduciary duties to Paron. This memorandum opinion addressed several outstanding procedural issues raised after trial concerning the post-trial briefing and the exhibits to be considered as part of the record. The court overruled in part and sustained in part Crombie's various objections to a number of plaintiffs' trial exhibits; denied Crombie's motion to reopen the record and admit additional evidence; denied Crombie's request that the court disregard plaintiffs' post-trial brief and award sanctions against them; denied Crombie's recent motion for involuntary dismissal; and considered the matter fully submitted and ripe for a final determination on the merits.View "Paron Capital Mgmt, LLC, et al. v. Crombie" on Justia Law

SES is a company that makes and supplies outer components or "skins" for grocery store refrigeration units. SES was formed in 2009 when its immediate predecessor, SER, was foreclosed by its bank. SES subsequently sued appellants, employees of SER, for injunctive relief under the Georgia Trade Secrets Act (GTSA), OCGA 10-1-760 et seq. Appellants then appealed, contending that the trial court erred when it found SES had standing to sue and when it granted equitable relief after finding that the preemption clause of the GTSA was inapplicable. The court held that, based upon the unique facts of the case, the trial court did not err when it declined to deny SES's action for lack of standing. The court found, however, that the trial court manifestly abused its discretion when it granted equitable relief to SES because the trial court's reliance on Owens v. Ink Wizard Tattoos was erroneous and the GTSA superseded all conflicting laws providing restitution or civil remedies for the misappropriation of trade secrets. Accordingly, the trial court's award of equitable relief pursuant to OCGA 9-5-1 was a manifest abuse of discretion and must be reversed.View "Robins, et al. v. Supermarket Equipment Sales, LLC; Smith v. Supermarket Equipment Sales" on Justia Law

This case involved the dispute between Gila Dweck, the CEO, director, and 30% stockholder in Kids International Corporation (Kids) and Albert Nasser, the Chairman and controlling stockholder of Kids. Dweck and Nasser accused each other of breaching their fiduciary duties and Nasser asserted third-party claims for breach of fiduciary duty against Dweck's colleagues Kevin Taxin, Kids' President, and Bruce Fine, Kids' CFO and corporate secretary. The court found that Dweck and Taxin breached their fiduciary duties to Kids by establishing competing companies that usurped Kids' corporate opportunities and converted Kids' resources; Dweck further breached her fiduciary duties by causing Kids to reimburse her for personal expenses; Fine breached his fiduciary duties by abdicating his responsibility to review Dweck's expenses and signing off on them wholesale; Dweck, Taxin, and Fine breached their duties by, inter alia, transferring Kids' customer relationships and business expectancies to their competing companies; and Dweck, Taxin, and Fine were liable to Kids for the damages they caused by their breaches of duty. The court largely rejected Dweck's breach of fiduciary duty claims against Nasser. Nevertheless, Nasser failed to carry his burden of proving that it was entirely fair for Kids to pay him a consulting fee that compensated him equally with Dweck when he performed no work for kids. Nasser was liable to Kids for those fees. Dweck also established her entitlement to an accounting from Nasser for some of the amount in cash that Kids had on hand at the time of the split.View "Dweck, et al. v. Nasser, et al." on Justia Law

Petitioners argued that defendants - who were the then-parent company and directors of Aristotle Corporation - breached their fiduciary duties by not disclosing all material facts in connection with a short-form merger under 8 Del. C. 253. At issue was whether petitioners, who already had the right to seek appraisal in connection with a section 253 merger, could add an additional claim alleging that the directors breached their fiduciary duty to disclose the material facts necessary for the stockholders to determine whether to seek appraisal when the only purpose of pressing the disclosure claim was to give petitioners the redundant right of a "quasi" version for something that they already possessed? Because petitioners have not alleged that they have suffered any cognizable injury that gave rise to standing, and because they were therefore asking in these unique circumstances for an improper advisory decision, the court granted defendants' motion to dismiss.View "In Re: Appraisal Of The Aristotle Corp." on Justia Law

Sterling, a limited liability corporation engaged in the business of importing and selling Iraqi currency, hired Grossi, a company that specialized in web-based marketing strategies, in an effort to create an internet-based sales platform. After the parties' dispute over the modification of a compensation scheme by which Grossi was paid, Sterling filed suit against Grossi seeking a temporary restraining order, interlocutory and permanent injunctions, and damages. Grossi subsequently appealed the grant of interlocutory injunction in favor of Sterling, contending that the trial court erred by entering an interlocutory injunction that failed to preserve the status quo. The court found that the trial court did not abuse its discretion by entering the injunction in light of Grossi's threats to do harm to the website. The court also rejected Grossi's contention that the interlocutory order was, in reality, a mandatory, permanent injunction affecting the rights of the parties. Accordingly, the judgment was affirmed.View "Grossi Consulting, LLC, et al. v. Sterling Currency Group, LLC" on Justia Law

In this original proceeding Allcat, a limited partnership, and one of its limited partners sought an order directing the Comptroller to refund franchise taxes Allcat paid that were attributable to partnership income allocated, but not distributed, to its natural-person partners. Allcat claimed it was entitled to a refund for two reasons. First, the tax facially violated Article VIII, Section 24 of the Texas Constitution because it was a tax on the net incomes of its natural-person partners that was not approved in a statewide referendum. Second, as applied by the Comptroller, to Allcat and its partners, the franchise tax violated Article VIII, Section 1(a) of the Constitution, which required taxation to be equal and uniform. The court held that: (1) the tax was not a tax imposed on the net incomes of the individual partners, thus it did not facially violated Article VIII, Section 24; and (2) the court did not have jurisdiction to consider the equal and uniform challenge.View "In re Allcat Claims Service, L.P. and John Weakly" on Justia Law

This was an action to inspect the books and records of a corporation under 8 Del. C. 220. A shareholder brought this action after a series of reports and events, including the resignation of the company's independent auditor, raised suspicions that the company had engaged in fraud and falsified its financial statements. The court found that the shareholder had established proper purposes to inspect the books and records of the company. Therefore, the court granted the shareholder's demand as to the documents at issue, but only to the extent the documents were necessary for one of his proper purposes. The court also denied the company's request to stay this action.View "Paul v. China MediaExpress Holdings, Inc." on Justia Law