Justia Corporate Compliance Opinion Summaries

Michael Bullinger appealed a district court judgment dismissing his declaratory judgment action seeking a determination of whether Sundog Interactive, Inc. (“Sundog”) violated N.D.C.C. § 10-19.1-88 and whether the individual defendants, Brent Teiken, Eric Dukart, Jonathan Rademacher, and Matthew Gustafson breached their fiduciary duties. Bullinger argued the court erred in failing to make adequate findings, erred in its application of N.D.C.C. § 10-19.1-88(10), erred in finding Bullinger has been paid the fair value of his ownership in Sundog, erred in finding Bullinger was not entitled to damages as a result of the individual defendants’ breach of their fiduciary duties, and erred in denying Bullinger costs and attorney’s fees. After review, the North Dakota Supreme Court concluded the trial court’s findings were inadequate to permit appellate review, therefore judgment was reversed and the case remanded for further proceedings. View "Bullinger v. Sundog Interactive, et al." on Justia Law

At issue before the Delaware Supreme Court in this case was the 2016 all-stock acquisition of SolarCity Corporation (“SolarCity”) by Tesla, Inc. (“Tesla”). Tesla’s stockholders claimed CEO Elon Musk caused Tesla to overpay for SolarCity through his alleged domination and control of the Tesla board of directors. At trial, the foundational premise of their theory of liability was that SolarCity was insolvent at the time of the Acquisition. Because the Court of Chancery assumed, without deciding, that Musk was a controlling stockholder, it applied Delaware’s most stringent "entire fairness" standard of review, and the Court of Chancery found the Acquisition to be entirely fair. In this appeal, the two sides disputed various aspects of the trial court’s legal analysis, including, primarily, the degree of importance the trial court placed on market evidence in determining whether the price Tesla paid was fair. Appellants did not challenge any of the trial court’s factual findings. Rather, they raised only a legal challenge, focused solely on the application of the entire fairness test. After careful consideration, the Delaware Supreme Court was convinced that the trial court’s decision was supported by the evidence and that the court committed no reversible error in applying the entire fairness test. View "In Re Tesla Motors, Inc. Stockholder Litigation" on Justia Law

Elkside Development, LLC (Elkside) owned and operated the Osprey Point RV Resort in Lakeside, Oregon. Part of Elkside’s business model involved selling membership contracts that conferred free use of the campground, among other benefits. In April 2017, Barnett Resorts LLC, an Oregon limited liability company operated by member-managers Stefani and Chris Barnett, purchased Elkside. Shortly after the purchase, the Barnetts sent a letter to all campground members, identifying them as “owners” of the resort, and indicating that they would not honor Elkside’s membership contracts. Plaintiffs, a group of 71 people who, collectively, were party to 39 membership contracts with Elkside, brought suit alleging a variety of claims against Stefani and Chris Barnett individually, and against the company, Barnett Resorts LLC. On appeal, this case raised three issues relating to: (1) a breach of contract claim; (2) an intentional interference with contract claim; and (3) a statutory claim of elder abuse, based on the fact that the majority of the membership contracts had been held by plaintiffs over the age of 65. As to the claims against the Barnetts individually, the trial court granted summary judgment for defendants, relying on ORS 63.165 and Cortez v. Nacco Materials Handling Group, 337 P3d 111 (2014). Plaintiffs argued, in part, that whether ORS 63.165 shielded the Barnetts from liability required considering whether their actions were entirely in support of the LLC, or whether they were, instead, in furtherance of a non-LLC individual motive. The Court of Appeals affirmed without opinion. The Oregon Supreme Court allowed review and reversed in part the Court of Appeals and the trial court. Specifically, the Supreme Court reversed as to the elder abuse claim, affirmed as to the breach of contract claim, and affirmed the intentional interference claim by an equally divided court. View "Adelsperger v. Elkside Development LLC" on Justia Law

The Delaware Court of Chancery was asked to resolve a dispute between a company and one of its former directors over the meaning of a stock option agreement and option grant notice. Applying the plain text of the agreement, the Court of Chancery determined that the dispute was to be resolved in accordance with a board committee’s interpretation of the agreement and notice. After the board, acting through a committee, interpreted the agreement and notice in a manner favorable to the company, the Court of Chancery, without hearing further from the former director, promptly dismissed the former director’s complaint for lack of subject matter jurisdiction. The Delaware Supreme Court found the Court of Chancery properly stayed the action to permit the board’s committee to interpret the agreement and notice in the first instance. The Supreme Court disagreed, however, with the court’s decision to dismiss the former director’s complaint without any meaningful review of the committee’s interpretation. The Court of Chancery’s order of dismissal was therefore reversed, and the case remanded for a review of the committee’s conclusions. View "Terrell v. Kiromic Biopharma, Inc." on Justia Law

Reliant Life Shares, LLC (Reliant or LLC) was a profitable limited liability company owned in equal parts by three members. Two of them, SM and DC, were longtime friends and business partners. After DC stopped working out of the offices of Reliant because of a medical condition, no one at Reliant expected him to return to work, but SM assured CDC he remained a loyal business partner. Before long, however, SM and the third member of Reliant, SG, tried to force out DC, splitting the company’s profits and other revenues 50/50 and paying DC nothing. The LLC sued DC, seeking a declaratory judgment that he was properly removed as a member of the LLC. DC cross-complained against the parties and the LLC, alleging breach of contract, fraud, breach of the duty of loyalty and several other causes of action, seeking damages, an accounting and imposition of a constructive trust over funds obtained through violation of fiduciary duties. The jury awarded DC damages and valued his equity interest. The LLC, SM, SG, and several of their entities appealed. They assert a multitude of arguments for reversal of the judgment.   The Second Appellate District found no merit in any of the claims and affirmed the judgment in full. The court found that the trial court acted well within its discretion when it decided alter ego claims in phase one. Further, the court found no merit in the election of remedies argument, either as it relates to prejudgment interest or anything else. View "Reliant Life Shares, LLC v. Cooper" on Justia Law

Metropolitan Washington Chapter, Associated Builders and Contractors, Inc. (“Metro Washington”), a corporate trade organization representing construction companies, brought this pre-enforcement challenge to the constitutionality of the District of Columbia First Source Employment Agreement Act of 1984. The statute requires contractors on D.C. government-assisted projects to grant hiring preferences to D.C. residents. Metro Washington appealed the district court’s Rule 12 dismissals of the claims under the dormant Commerce Clause, U.S. Const. and the Privileges and Immunities Clause, and the grant of summary judgment to the District of Columbia on the substantive due process claim.   The DC Circuit affirmed the district court’s Rule 12(b)(6) dismissal of Metro Washington’s dormant Commerce Clause claim and Rule 12(c) dismissal of the Privileges and Immunities Clause claim. The court also affirmed the district court’s grant of summary judgment to the District of Columbia on the inapplicability of the Privileges and Immunities Clause to a corporation. Further, although Metro Washington has Article III standing as an association, it lacks third-party standing to raise its alternative Privileges and Immunities claim based on incorporation through the Fifth Amendment, and therefore the court dismissed this alternative contention. View "Metropolitan Washington Chapter, Associated Builders and Contractors, Inc. v. DC" on Justia Law

Jaludi worked at Citigroup. After he reported company wrongdoing, he was demoted, transferred, and (in 2013) terminated. He claims Citigroup blacklisted him from the financial industry. In 2015, Jaludi sued Citigroup for retaliation under both the Sarbanes-Oxley Act and RICO. The district court sent his claims to arbitration. Jaludi appealed the arbitration order. In early 2018, while that appeal was pending, he filed an administrative complaint with the Secretary of Labor, adding one new allegation that, in late 2017, a headhunter had stopped returning his calls. In 2019, the Third Circuit remanded, holding that he was not required to arbitrate his Sarbanes-Oxley claims.On remand, the district court dismissed, finding his administrative complaint untimely. Though Sarbanes-Oxley required an administrative complaint within 180 days of the retaliatory conduct, he had waited more than two years after the last incident. Jaludi argued that the court should have granted him leave to amend because the 2017 allegation that he added in his administrative complaint happened fewer than 180 days before that complaint, making it timely. The Third Circuit affirmed. Although neither filing the administrative complaint after the statute of limitations had run nor suing before exhausting his administrative remedies was jurisdictional under the Sarbanes-Oxley Act, Jaludi’s delay in filing justified the dismissal. View "Jaludi v. Citigroup & Co." on Justia Law

Iris, incorporated in 1999, went public in 2007. In 2019, the SEC revoked the registration of Iris’s securities. Since its incorporation, Chin has been chairman of Iris’s three-member board of directors, its president, secretary, CEO, CFO, and majority shareholder. Chin’s sister was also a board member. Farnum was a board member, 2003-2014, and owned eight percent of Iris’s stock. In 2014, Farnum requested inspection of corporate minutes, documents relating to the acquisition of Iris’s subsidiary, and cash flow statements, then, in his capacity as a board member and shareholder, sought a writ of mandate. Before the hearing on Farnum’s petition, Farnum was voted off Iris’s board. The court denied Farnum’s petition (Corporations Code 1602) because Farnum no longer had standing to inspect corporate records due to his ejection from the board, and his request was “overbroad and lack[ed] a statement of purpose reasonably related to his interests as a shareholder.”Weeks later, Farnum served 31 inspection requests on Iris and subsequently filed another mandamus petition. The superior court denied the petition and Farnum’s associated request for attorney fees. On remand with respect to certain records, Farnum sought reimbursement of his expenses in enforcing his rights as a shareholder ($91,000). The court of appeal affirmed the denial of the request. Farnum scored “only a partial victory” given the scope of what he sought; there was no showing that on the whole, Iris acted without justification in refusing Farnum’s inspection demands. View "Farnum v. Iris Biotechnologies Inc." on Justia Law

A corporate shareholder alleged the corporation violated his statutory right to inspect certain records and documents. The superior court found that the shareholder did not assert a proper purpose in his request. The shareholder appealed, arguing the superior court erred by finding his inspection request stated an improper purpose, sanctioning him for failing to appear for his deposition, and violating his rights to due process and equal protection by being biased against him. After review, the Alaska Supreme Court reversed the superior court’s order finding that the shareholder did not have a proper purpose when he requested the information at issue from the corporation, but it affirmed the superior court’s discovery sanctions. View "Pederson v. Arctic Slope Regional Corporation" on Justia Law

ZF Micro Solutions, Inc., the successor of now deceased ZF Micro Devices, Inc., alleged TAT Capital Partners, Ltd., murdered its predecessor by inserting a board member who poisoned it. The trial court decided the claim for breach of TAT’s fiduciary duty as a director was equitable rather than legal and, after a court trial, entered judgment for TAT. ZF Micro Solutions argued this was error. The Court of Appeal agreed, holding that while examining the performance of a board member’s fiduciary duties would be required, resolution of this claim did not implicate the powers of equity, and it should have been tried as a matter at law. Judgment was reversed and the matter remanded for further proceedings. View "ZF Micro Solutions, Inc. v. TAT Capital Partners, Ltd." on Justia Law