Justia Corporate Compliance Opinion Summaries

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

Two shareholders brought a shareholder derivative suit against the directors of an Indiana company, Biglari Holdings, that owns two restaurant chains, Western Sizzlin’ and Steak ‘n Shake, which operate some restaurants, and franchise others. They claimed that the board approved “entrenchment transactions,” intended to cement CEO Biglari’s control of the company and enrich him at the expense of other shareholders: the sale of an investment company to CEO Biglari and a stock offering. The plaintiffs characterized the board’s members as Biglari’s puppets and alleged demand futility: that it was a forgone conclusion that the board would not respond to their demands. The Seventh Circuit affirmed the district court's rejection of the claim. Given the stringency of the Indiana standard of demand futility and the lack of strong support for the plaintiffs’ claims to demonstrate that futility, the challenged transactions, individually or together, cannot be deemed so oppressive to shareholders as to create a substantial doubt that the transactions were the product of a valid exercise of business judgment by an unbiased and independent board. View "Taylor v. Biglari" on Justia Law

The Company was organized as a limited liability company in 2007; its sole managing member was another LLC, whose sole members were the Ngs, who controlled and managed the Company. Defendant was one of the Company’s lawyers. The Company’s stated purpose was to serve as an investment company making secured loans to real estate developers. The Managers actually created the Company to perpetrate “a fraudulent scheme” by which the Company transferred the money invested in it to another entity the Managers controlled. Defendant knew that the Managers intended to and did use the Company for this fraudulent purpose and, working with the Managers, helped the Company conceal the nature of its asset transfers. The Company was eventually rendered insolvent and its investors filed an involuntary bankruptcy petition. The bankruptcy trustee filed suit against Defendant, alleging tort claims based on Defendant’s involvement in the Company’s fraud. Defendant argued that the claims are barred by the in pari delicto doctrine. The court of appeal affirmed dismissal, finding that the in pari delicto applies to the trustee and rejecting an argument that the doctrine should not bar her claims because the wrongful acts of the Managers should not be imputed to the Company. View "Uecker v. Zentil" on Justia Law

Wiest, formerly a Tyco employee, claimed that Tyco unlawfully terminated his employment for reporting suspected securities fraud violations pertaining to the accounting treatment of two Tyco events, in violation of the anti-retaliation provision of the Sarbanes-Oxley Act, 18 U.S.C. 1514A. Wiest claims that for six months, he refused, as an accountant, to process payments allegedly due from Tyco that related to two Tyco employee and dealer meetings in resort settings. Tyco contends that Wiest’s involvement with the events at issue was minimal and he did not frustrate, or even inconvenience, Tyco’s management, and that ,more than eight months later, Tyco’s human resources director—who had no knowledge of, Wiest’s alleged protected activity— investigated complaints that Wiest made inappropriate sexual comments to several female Tyco employees, and that he had inappropriate sexual relationships with two subordinates, resulting in Wiest’s termination. The Third Circuit affirmed summary judgment for Tyco. Wiest failed to offer any evidence to establish that his protected activity was a contributing factor to any adverse employment action; Tyco established that it would have taken the same actions with respect to Wiest in the absence of Wiest’s accounting activity given the thoroughly documented, investigation conducted by its human resources director. View "Wiest v. Tyco Elec. Corp" on Justia Law

Plaintiffs held warrants to buy common stock issued by defendant BlueFire Ethanol Fuels, Inc. The warrants included an anti-dilution provision, requiring BlueFire to adjust the exercise price set in the warrants “to equal the consideration paid” by a subsequent investor for equity interests in BlueFire. The anti-dilution provision did not apply to certain issuances of securities, as specified in a list of five categories of exceptions. A few years after issuance of the warrants, BlueFire entered into an agreement with non-party Lincoln Park Capital Fund, LLC, creating an “equity line of credit” or a “standby equity distribution agreement.” Lincoln promised to make up to $10 million available to BlueFire to be accessed at the option of BlueFire over a set period of time. In exchange, BlueFire issued common stock and warrants to Lincoln at the time the agreement was executed, and promised to issue additional common stock in exchange for any future cash received from Lincoln. Plaintiffs sued BlueFire for breach of contract and declaratory relief when BlueFire refused to apply the warrants’ anti-dilution provision to the Lincoln agreement. Plaintiffs also sued individual defendants Arnold Klann and Christopher Scott for breach of fiduciary duty. After a bench trial, the court rejected the breach of fiduciary duty claim against Klann and Scott. But the court ruled the anti-dilution provision applied to the Lincoln transaction and that BlueFire had breached the warrants. The court also reduced the exercise price for the warrants from $2.90 per share to $0 per share, and authorized plaintiffs to immediately exercise the warrants. The court did not award monetary damages to plaintiffs. The parties appealed aspects of the judgment adverse to their respective interests. After review, the Court of Appeal agreed that a corporation’s officers did not have a fiduciary duty to warrant holders. The Court also agreed with the court’s interpretation of plaintiffs’ warrants. The anti-dilution provision applies to the Lincoln agreement and stock issuances to Lincoln resulting from that agreement. But substantial evidence did not support the court’s decision to reduce plaintiffs’ exercise price to $0. The Court therefore reversed the judgment and remanded for retrial solely on the proper remedy for BlueFire’s breach of contract. View "Speirs v. Bluefire Ethanol Fuels, Inc." on Justia Law

TriQuint Semiconductor, Inc., and its directors were defendants in two consolidated shareholder derivative suits filed in Washington State. TriQuint moved to dismiss those suits on the ground that its corporate bylaws establish Delaware as the exclusive forum for shareholder derivative suits. The trial court denied TriQuint’s motion to dismiss, and the Supreme Court allowed TriQuint’s petition for an alternative writ of mandamus. After review, the Supreme Court concluded that, as a matter of Delaware law, TriQuint’s bylaw was a valid forum-selection clause and bound its shareholders. The Court also concluded that, as a matter of Oregon law, the bylaw was enforceable. The Court issued a peremptory writ of mandamus directing the trial court to grant TriQuint’s motion to dismiss. View "Roberts v. TriQuint Semiconductor, Inc." on Justia Law

The Court of Chancery issued four opinions which were appealed to the Delaware Supreme Court. In sum, the appeal and cross-appeal in this case centered on the Chancery Court’s final judgment finding that RBC Capital Markets, LLC aided and abetted breaches of fiduciary duty by former directors of Rural/Metro Corporation ("Rural" or the "Company") in connection with the sale of the Company to an affiliate of Warburg Pincus LLC, a private equity firm. RBC raised six issues on appeal, namely: (1) whether the trial court erred by holding that the board of directors breached its duty of care under an enhanced scrutiny standard; (2) whether the trial court erred by holding that the board of directors violated its fiduciary duty of disclosure by making material misstatements and omissions in Rural’s proxy statement, dated May 26, 2011; (3) whether the trial court erred by finding that RBC aided and abetted breaches of fiduciary duty by the board of directors; (4) whether the trial court erred by finding that the board of directors’ conduct proximately caused damages; (5) whether the trial court erred in applying the Delaware Uniform Contribution Among Tortfeasors Act ("DUCATA"); and (6) whether the trial court erred in calculating damages. After careful consideration of each of RBC’s arguments on appeal, the Supreme Court found no reversible error and affirmed the "principal legal holdings" of the Court of Chancery. View "RBC Capital Markets, LLC v. Jervis" on Justia Law