Justia Corporate Compliance Opinion Summaries

The Town of Lebanon filed a land use complaint against East Lebanon Auto Sales (the LLC) and Linda Corbin, the sole member of the LLC, alleging that property owned by the LLC in Lebanon constituted an illegal automobile graveyard and illegal junkyard and that the property had an improper subsurface wastewater system. The district court issued a judgment against the LLC and Corbin in the amount of $2000 plus attorney fees. On appeal, the Supreme Court (1) vacated the decision of the district court as to Corbin individually, concluding that the record contained no evidence that suggested that Corbin abused the privilege of incorporating or that an unjust result would occur if only the LLC were held liable on the Town's complaint; and (2) affirmed the judgment of the district court in all other respects, finding the remaining issues raised by the LLC to be without merit. View "Town of Lebanon v. East Lebanon Auto Sales, L.L.C." on Justia Law

This case stemmed from a contract between the Indonesian government and the Exxon Mobil Corporation (Exxon), a United States corporation, and several of its wholly owned subsidiaries where Exxon operated a large natural gas extraction and processing facility in the Aceh province. Plaintiffs were fifteen Indonesian villagers. Eleven villagers filed a complaint in 2001 alleging that Exxon's security forces committed murder, torture, sexual assault, battery, and false imprisonment in violation of the Alien Tort Statute (ATS) and the Torture Victim Protection Act (TVPA), 28 U.S.C. 1350, and various common law torts. Four villagers alleged that in 2007, Exxon committed various common law torts. All plaintiffs alleged that Exxon took actions both in the United States and at its facility in the Aceh province that resulted in their injuries. Plaintiffs challenged the subsequent dismissal of their claims and Exxon filed a cross-appeal, inter alia, raising corporate immunity for the first time. The court concluded that aiding and abetting liability was well established under the ATS. The court further concluded that neither the text, history, nor purpose of the ATS supported corporate immunity for torts based on heinous conduct allegedly committed by its agents in violation of the law of nations. The court affirmed the dismissal of the TVPA claims in view of recent precedent of the court. The court concluded, however, that Exxon's objections to justiciability were unpersuasive and that the district court erred in ruling that plaintiffs lacked prudential standing to bring their non-federal tort claims and in the choice of law determination. The court finally concluded that Exxon's challenge to the diversity of parties in the complaint at issue was to be resolved initially by the district court. Therefore, the court affirmed the dismissal of plaintiffs' TVPA claims, reversed the dismissal of the ATS claims at issue, along with plaintiffs' non-federal tort claims, and remanded the cases to the district court. View "John Doe VIII, et al. v. Exxon Mobil Corp., et al." on Justia Law

This insurance coverage dispute raised issues arising out of financial regulators' investigations in alleged accounting misstatements by MBIA, Inc. (MBIA) and related litigation. Based on these events, MBIA made claims under two $15 million director and officer (D&O) insurance policies it had purchased from Federal Insurance Co. (Federal) and ACE American Insurance Co. (ACE), seeking coverage for costs associated with these claims as losses under the policies. The district court granted summary judgment in favor of MBIA on two of its three coverage claims but granted summary judgment in favor of Federal and ACE on one of MBIA's coverage claims. The parties subsequently appealed the district court's judgments. The court affirmed the district court with respect to coverage for all costs except those related to the independent consultant where the independent consultant's investigation was a covered cost under the policies. Therefore, the judgment of the district court was affirmed in part and reversed in part. The court remanded the case to the district court for entry of judgment in favor of MBIA on its claim for coverage of the independent consultant's costs. View "MBIA Inc. v. Federal Ins. Co." on Justia Law

This case involved a stockholder challenge to the decision of two funds within the Vanguard mutual fund complex to purchase shares of allegedly illegal foreign online gambling businesses that were publicly traded in overseas capital markets. Plaintiffs' complaint asserted both derivative and direct claims based on their allegations that defendants' actions constituted a violation of their fiduciary duties, negligence, and waste. Defendants moved to dismiss the complaint on the grounds that the court could not assert personal jurisdiction over the individual defendants named in the complaint; all plaintiffs' claims were derivative in nature and therefore, the complaint must be dismissed for plaintiffs' failure to make demand on the board of trustees or demonstrate why a demand would be futile; and the complaint failed to state a claim. The court granted defendants' motions and dismissed with prejudice all of the claims in the complaint based on the first two grounds. Consequently, the court did not address defendants' additional argument that the complaint failed to state a claim.

Martin J. Bradley III and his father, Martin J. Bradley, Jr. (collectively, the Bradleys), owned Bio-Med Plus, Inc. (Bio-Med), a Miami-based pharmaceutical wholesaler that purchased and sold blood-derivatives. This case stemmed from multiple schemes to defraud the Florida and California Medicaid programs by causing them to pay for blood-derivative medications more than once. The Government chose to prosecute the schemes and a grand jury indicted eight individuals, including Albert L. Tellechea, and two companies, Bio-Med, and Interland Associates, Inc. The Bradleys, Bio-Med, and Tellechea subsequently appealed their convictions and raised several issues on appeal. The court affirmed the Bradleys', Bio-Med's, and Tellechea's convictions, and Bradley III's and Bio-Med's sentences. The court vacated Bradley, Jr.'s sentences on Counts I and 54 and Tellechea's sentence on Count 3, and remanded those counts for resentencing. The court reversed the district court's October 4, 2006 order appointing the receiver and monitor, and its supplemental receivership order of May 17, 2007. The court finally held that, as soon as circumstances allowed, the receivership should be brought to an immediate close.

This case stemmed from a dispute between MBIA Insurance Corporation (MBIA) and certain of its policyholders who hold financial guarantee insurance policies. The principal question presented was whether the 2009 restructuring of MBIA and its related subsidiaries and affiliates authorized by the Superintendent of the New York State Insurance Department precluded these policyholders from asserting claims against MBIA under the Debtor and Creditor Law and the common law. The court held that the Superintendent's approval of such restructuring pursuant to its authority under the Insurance Law did not bar the policyholders from bringing such claims. Accordingly, the court held that the order of the Appellate Division should be modified, without costs, in accordance with the opinion.

Enron Creditors Recovery Corp. (Enron) sought to avoid and recover payments it made to redeem its commercial paper prior to maturity from appellees, whose notes were redeemed by Enron. On appeal, Enron challenged the district court's conclusion that 11 U.S.C. 546(e)'s safe harbor, which shielded "settlement payments" from avoidance actions in bankruptcy, protected Enron's redemption payments whether or not they were made to retire debt or were unusual. The court affirmed the district court's decision and order, holding that Enron's proposed exclusions from the reach of section 546(e) have no basis in the Bankruptcy Code where the payments at issue were made to redeem commercial paper, which the Bankruptcy Code defined as security. Therefore, the payments at issue constituted the "transfer of cash ... made to complete [a] securities transaction" and were settlement payments within the meaning of 11 U.S.C. 741(8). The court declined to address Enron's arguments regarding legislative history because the court reached its conclusion based on the statute's plain language.

Plaintiff sued defendants under RICO, 18 U.S.C. 1961-1968, principally alleging injury to plaintiff's business by reason of defendants' establishment of a competing commercial enterprise through the investment of income derived from a pattern of racketeering activity. At issue was whether the district court properly granted defendants' motions for summary judgment on the pleadings and, in the alternative, for summary judgment on the grounds that plaintiff's complaint and the record were insufficient to show that any injury to plaintiff's business was proximately caused by defendants' alleged violation of section 1962(a). The court held that to the extent that plaintiff claimed injury from defendants' continuation in its Bronx store of the cash-no-tax scheme conducted in the Queens store, that claim appeared to be conceptually indistinguishable from the section 1962(c) claim previously rejected by the Supreme Court. The court held that to the extent, however, that plaintiff claimed that it lost sales to defendants because defendants invested the proceeds of their pattern of racketeering activity to establish and operate defendants' new store in the Bronx, the court rejected defendants' contentions and concluded that the district court erred in granting summary judgment on the pleadings on the basis of Bell Atlantic Corp. v. Twombly and erred in granting summary judgment.

This action was before the court on a motion to expedite regarding a transaction in which a Delaware limited partnership was to be acquired for either cash or a combination of cash and the acquirer's stock. Plaintiff-unitholders of the target claim that the process undertaken by the conflicts committee was deficient and therefore, legally ineffective because it failed to consider the fairness of payments made to certain conflicted parties and the independence of the conflicts committee members was tainted by a grant of unvested phantom units they received shortly before merger discussion began. Plaintiffs also contended that the directors failed to provide adequate disclosures to enable the unitholders to make an informed decision as to whether to vote for the transaction. Plaintiffs also asserted that they will suffer irreparable harm if prompt equitable relief was not granted because the general partner of the target was controlled by three allegedly single-purpose entities whose sole assets were their interests in the general partner. As a result, plaintiffs asserted that these entities would become empty shells unless they were prevented from distributing the consideration they received in the transaction. The court held that plaintiffs have shown that at least one of their claims was colorable but plaintiffs' allegations were simply to speculative to support the required showing of irreparable harm. Accordingly, the court denied plaintiffs' motion to expedite.

The SEC brought suit against senior officers of Gateway Incorporated ("Gateway") claiming that they unlawfully misrepresented Gateway's financial condition in the third quarter of 2000 in order to meet financial analysts' earnings and revenue expectations. After a three week trial, a jury found former Gateway financial executives, John J. Todd and Robert D. Manza, liable on all claims by the SEC. All parties appealed the district court's order in part. The court reversed the district court's order granting in part Todd's and Manza's motions for judgment as a matter of law on the antifraud claims under the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq., because substantial evidence supported the jury's verdict that Todd and Manza at least recklessly misrepresented revenue related to the Lockheed transaction, and that Todd recklessly misrepresented revenue as to the VenServ transaction, in the third quarter of 2000. The court also reversed the district court's order granting Jeffrey Weitzen's, former Gateway President and CEO, motion for summary judgment as to the Section 10(b) and Rule 10b-5 violations because there were genuine issues of material fact regarding whether Weitzen knowingly misrepresented Gateway's financial growth as "accelerated" given his knowledge of the unusual Lockheed and AOL transactions. There were also issues of material fact as to whether Weitzen was a "control person" under Section 20(a). The court affirmed Weitzen's motion for summary judgment as to the Rule 13b2-2 claim because there was no evidence that Weitzen signed a letter to Gateway's auditors knowing that it misrepresented Gateway's financial position. The court also affirmed the district court's order denying in part Todd's and Manza's motions for judgment as a matter of law on the aiding and abetting claims and their motions for a new trial.