Justia Corporate Compliance Opinion Summaries

Defendant appealed an order under Corporations Code section 7616 confirming the validity of an election removing the former board of the Lake Lindero Homeowners Association, Inc. (the Association) and electing a new board of directors. Defendant made two contentions: (1) the election was not valid because it contravened the Association’s bylaws and statutory provision governing board recall elections, and (2) section 7616 did not authorize Plaintiffs' action or the trial court’s order validating the recall election.   The Second Appellate District affirmed. The court held that the appeal is not moot: material questions remain regarding the construction of the bylaws and statutes governing the vote required to remove the association’s board of directors. Further, the court explained that the trial court correctly determined the former board was validly recalled under the Association’s bylaws and statutory law. The court explained that the trial court correctly recognized section 7616, subdivision (d) authorizes the court to “direct such other relief as may be just and proper” in connection with confirming the validity of a board election. Here, the complaint alleged Defendant, in his role as CEO and with the sanction of a majority of the former board, was engaged in frustrating the new board’s efforts to fulfill its duties under the Association’s bylaws. Having confirmed the validity of the new board’s election, the statute plainly authorized the trial court to enter an order confirming Defendant had no authority to act on behalf of the Association, as was “just and proper” under the Association’s bylaws. View "Lake Lindero Homeowners Assn., Inc. v. Barone" 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

The Internal Revenue Service (IRS) generally has three years from the date a taxpayer files a tax return to assess any taxes that are owed for that year. In this case, we must decide whether a partnership “filed” its 2001 tax return by faxing a copy of that return to an IRS revenue agent in 2005 or by mailing a copy to an IRS attorney in 2007. If either of those actions qualified as a “filing” of the partnership’s return, the statute of limitations would bar the IRS’s decision, more than three years later, to disallow a large loss the partnership had claimed.   The Ninth Circuit affirmed the Tax Court’s decision. The court held that neither Seaview Trading LLC’s faxing a copy of their delinquent 2001 tax return to an IRS revenue agent in 2005, nor mailing a copy to an IRS attorney in 2007, qualified as a “filing” of the partnership’s return, and therefore the statute of limitations did not bar the IRS’s readjustment of the partnership’s tax liability. The court concluded that because Seaview did not meticulously comply with the regulation’s place-for-filing requirement, it was not entitled to claim the benefit of the three-year limitations period. The court wrote that its conclusion was consistent with cases from other circuits and a long line of Tax Court decisions. The court also rejected Seaview’s argument that the regulation’s place-for-filing requirement applies only to returns that are timely filed—not to those that are filed late. View "SEAVIEW TRADING, LLC, AGK INVE V. CIR" on Justia Law

Plaintiff, an investor and venture capitalist and the CEO of InterOil Corporation (“InterOil”), developed a business relationship. Throughout that relationship, Plaintiff (and “entities controlled and beneficially owned by him”) provided loans, cash advances, and funds to the CEO and InterOil. Plaintiff and the CEO continued to have a business relationship until 2016, at which point the CEO’s actions and words made Plaintiff concerned he would not receive his shares back from the CEO. In late 2017, as part of a larger suit against the CEO, Plaintiff and Aster Panama sued the J.P. Morgan Defendants for (1) breach of trust and fiduciary duty, (2) negligence, and (3) conspiracy to commit theft. The district court granted summary judgment on all counts relating to the J.P. Morgan defendants and awarded them attorneys’ fees under the Texas Theft Liability Act (“TTLA”).   The Fifth Circuit affirmed. Under Texas law, the only question is whether the J.P. Morgan Defendants expressly accepted a duty to ensure the stocks were kept in trust for Plaintiff or Aster Panama. That could have been done by express agreement or by the bank’s acceptance of a deposit that contained writing that set forth “by clear direction what the bank is required to do.” Texas courts require a large amount of evidence to show that a bank has accepted such a duty. Here, no jury could find that the proffered statements and emails were sufficient evidence of intent from the J.P. Morgan Defendants to show an express agreement that they “owe[d] a duty to restrict the use of the funds for certain purposes.” View "Civelli v. J.P. Morgan Chase" on Justia Law

The Delaware Court of Chancery entered judgment in favor of appellee Sharon Hawkins on her request for a declaration that the irrevocable proxy which provided appellant W. Bradley Daniel (“Daniel”) with voting power over all 100 shares of N.D. Management, Inc. (“Danco GP”) (the “Irrevocable Proxy”), did not bind a subsequent owner of such Danco GP shares. The Court of Chancery also held that an addendum to the Irrevocable Proxy did not obligate the current owner of the Danco GP shares, MedApproach, L.P. (the “Partnership”), to demand that the buyer in a sale to an unaffiliated third party bind itself to the Irrevocable Proxy. Daniel appealed the Court of Chancery’s judgment that the Irrevocable Proxy did not run with the Majority Shares, arguing the court erred by: (1) rather than interpreting and applying the plain language of the Irrevocable Proxy as written, the court relied on the Restatement (Third) of Agency, which was not adopted until nearly a decade after the parties entered into the Irrevocable Proxy; (2) reading additional language into the Irrevocable Proxy in order to support its finding that the broad “catch-all” language that the parties included to prevent termination of the Irrevocable Proxy did not encompass a sale of the shares; and (3) not giving effect to all of the terms of the Irrevocable Proxy and improperly limiting the assignment clause of the Irrevocable Proxy so as not to bind assigns of the stockholder. Finding no reversible error, the Delaware Supreme Court affirmed the Court of Chancery. View "Daniel v. Hawkins" on Justia Law

Just before the Chapter 11 reorganization plans of Caribevision Holdings, Inc. and Caribevision TV Network, LLC was set to be confirmed, the debtors filed an emergency motion to modify the plans under 11 U.S.C. Section 1127(a). The initial plans called for equity in the reorganized companies to be split between four shareholders: R.D.B., Pegaso Television Corp., E.B., and Vasallo TV Group. The modification, after being approved by the bankruptcy court, stripped the first three of their equity and allocated full ownership to the fourth—a company controlled by the debtors’ Chief Executive Officer. the three ousted shareholders, who collectively call themselves the Pegaso Equity Holders, now challenge the bankruptcy court’s order granting the debtors’ emergency motion to modify the reorganization plans. They contend that they were entitled to a revised disclosure statement and a second opportunity to vote on the plans under Federal Rule of Bankruptcy Procedure 3019(a)—a procedural protection the bankruptcy court did not provide them.   The Eleventh Circuit reversed the order granting the debtor’s emergency motion to modify the reorganization plans, reversed in part the bankruptcy court’s order confirming the reorganization plans to the extent that it adopts the modification, and remanded to the bankruptcy court to fashion an equitable remedy. The court held that the bankruptcy court erred in granting the debtor’s modification without first requiring that the debtor provide the Pegaso Equity Holders with a revised disclosure statement and a second opportunity to cast a ballot. View "Emilio Braun, et al. v. America-CV Station Group, Inc., et al." 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

Plaintiff was employed through various foreign subsidiaries of Morgan Stanely between 2006 and 2016. Plaintiff claims that, between 2014 and 2016, he raised concerns about U.S. securities violations, which occurred overseas but affected U.S. markets. After receiving a pay cut and a recommendation that he find employment elsewhere. In January 2016, Plaintiff resigned. Plaintiff then hired counsel. However, counsel withdrew after Morgan Stanley threatened to pursue an action against counsel for violations of his professional obligations.The Department of Labor Administrative Review Board dismissed Plaintiff's claim under Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes–Oxley Act, finding that Section 806 did not apply because he was not an "employee" at the time of any alleged retaliation. The D.C. Circuit affirmed, finding that Plaintiff did not meet the definition of "employee" at any time during the alleged retaliation. View "Christopher Garvey v. Administrative Review Board" 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 client who retained Plaintiff, the Law Corporation, to represent him in a marital dissolution action. The client assigned the judgments to Musick Peeler & Garrett LLC (Musick Peeler). In October 2019, the Law Corporation filed a motion (the setoff motion) in the superior court to set off against its judgment debt to Musick Peeler a debt that Dougherty allegedly owes to the Law Corporation. The client’s alleged tortious actions to hinder, delay, or defraud the Law Corporation in its efforts to collect on a 1999 default judgment prior to our opinion vacating that judgment and declaring it void in 2009. The trial court denied the motion and the Law Corporation appealed.   The Second Appellate District affirmed. The court explained that to the extent the Law Corporation incurred any fees or costs in connection with its defense against the collateral attack actions in California, they were incurred in defending actions by the client, not a third person. These actions, therefore, do not support a setoff claim based on the tort of another doctrine. Further, even if the Law Corporation’s motion was procedurally proper, the Law Corporation failed to support its setoff claims with relevant evidence and, therefore, the court did not abuse its discretion in denying the motion. View "Karton v. Musick, Peeler, Garrett LLP" on Justia Law