Justia Corporate Compliance Opinion Summaries

Two companies, Gulf Coast Investments, LLC and Trigger Energy Holdings, LLC, sold their membership interests in Blueprint Energy Partners, LLC to TCU Holdings, LLC. Blueprint, formed in 2017 for shale oil operations in Wyoming, originally had three equal members: Gulf Coast, Trigger, and TCU, with Aladdin Capital, Inc. as the manager and primary creditor. After financial struggles and interpersonal conflicts, the parties negotiated the buyout in 2019. TCU’s principal, Kent Stevens, threatened to leave and take staff and clients unless Gulf Coast and Trigger agreed to a set price, known as the “dynamite option.” Despite these threats, the plaintiffs were represented by counsel who advised them of alternatives, and negotiations spanned several months, culminating in a signed purchase agreement.The Circuit Court of the Second Judicial Circuit, Minnehaha County, South Dakota, reviewed the plaintiffs’ post-sale lawsuit alleging economic duress, breach of operating agreement, breach of fiduciary duty, tortious interference, shareholder oppression, unjust enrichment, and sought accounting and injunctive relief. The circuit court granted summary judgment for the defendants on all counts, reasoning that the plaintiffs voluntarily entered the agreement, had legal alternatives, and that the contract itself contained a waiver of further claims. The court also addressed each substantive claim on its merits, finding no legal basis for recovery.On appeal, the Supreme Court of the State of South Dakota affirmed the circuit court’s grant of summary judgment. The Supreme Court held that, under either the three-part or two-part test for economic duress, the plaintiffs failed to show involuntary acceptance or lack of reasonable alternatives. The court also found no breach of the operating agreement or fiduciary duties, no tortious interference or shareholder oppression, and no basis for unjust enrichment or usurpation. The holding confirms the validity and enforceability of the purchase agreement and disposes of all claims against the defendants. View "Trigger Energy Holdings v. Stevens" on Justia Law

Kaiser-Francis Oil Company (KFOC), a Delaware corporation, and its subsidiary Aurora-KF, LLC, sold Aurora Gas, LLC, an Alaska company, to Rieck Oil, Inc., a Delaware corporation formed by Kay Rieck. The sale included an indemnity guarantee from Deutsche Oel & Gas, S.A. (DOGSA), another company owned by Rieck, to cover obligations under a pre-existing guarantee by George B. Kaiser to Cook Inlet Regional, Inc. (CIRI). When Aurora Gas went bankrupt, CIRI called on Kaiser and KFOC to fulfill the obligations, but DOGSA and Rieck Oil did not indemnify them.KFOC sued Rieck Oil, DOGSA, and Kay Rieck in the Alaska Superior Court, seeking to pierce Rieck Oil’s corporate veil to hold Rieck personally liable. The superior court applied Delaware law, reasoning that most jurisdictions apply the law of the state of incorporation for veil-piercing claims. Under Delaware law, the court found that KFOC failed to prove the necessary element of fraud or injustice to pierce the corporate veil and ruled in favor of Rieck.The Supreme Court of Alaska reviewed the case, focusing on whether Alaska or Delaware law should apply to the veil-piercing claim. The court held that Alaska law applies, as veil-piercing is not a matter of internal corporate affairs but involves the rights of third parties. The court reasoned that Alaska has a more significant interest in the matter, given the involvement of Alaska land and an Alaska Native Corporation. Consequently, the court vacated the superior court’s ruling and remanded the case for further proceedings under Alaska law. View "Kaiser-Francis Oil Company v. Deutsche Oel & Gas, S.A." on Justia Law

This dispute arose from violations issued by the Department of Labor's Mine Safety and Health Administration. At issue was whether the word "corporation" includes limited liability companies (LLCs) for purposes of the Federal Mine Safety and Health Act of 1977 (the Mine Act), 30 U.S.C. 801 et seq. The court concluded that the terms "corporation" and "corporate operator" in the Mine Act are ambiguous. Applying Chevron deference, the court concluded that the Secretary's interpretation is reasonable where, most importantly, construing section 110(c) to include agents of LLCs is consistent with the legislative history. Therefore, the court held that an LLC is a corporation for purposes of the Mine Act and that section 110(c) can be used to assess civil penalties against agents of an LLC. Because substantial evidence supported the ALJ's decision to hold petitioners personally liable for the order at issue, the court affirmed on this issue. Finally, the order underlying their civil penalties was not duplicative. Accordingly, the court affirmed the ALJ's decision. View "Sumpter, et al. v. Secretary of Labor, et al." on Justia Law

A 2007 stockholders’ derivative suit alleged that Massey’s officers and directors breached their fiduciary duties by failing to make sure that Massey employees were complying with environmental and mine worker safety laws and regulations. A 2008 settlement released the claims in exchange for certain reforms to be made a part of corporate governance policies relating to company oversight and conduct regarding environmental and mine worker safety standards. The reforms were incorporated into Massey’s written Corporate Governance Agreement and were to remain in effect for five years. On April 5, 2010, an explosion occurred at Massey’s Upper Big Branch Mine at Montcoal, West Virginia, killing 29 miners. According to a contempt petition, investigations subsequent to the disaster found systematic mine safety compliance failures leading up to the explosion. The trial court dismissed the civil contempt petition. The West Virginia Supreme Court affirmed. The petitioners lacked standing to pursue contempt proceedings because they no longer own any Massey stock; Massey has been purchased by Alpha Natural Resources; and the respondents were removed by Alpha as corporate directors and officers. View "Manville Pers. Injury Settlement Fund v. Blankenship" on Justia Law

This case arose when Mirant, an energy company, sought to expand its European operations by acquiring nine power islands from General Electric. When the power island deal fell through, Mirant made payments pursuant to a guaranty and soon thereafter sought bankruptcy protection. Mirant, as debtor-in-possession, sued Commerzbank and other lenders in bankruptcy court to avoid the guaranty and to recover the funds Mirant paid pursuant to the guaranty. After Mirant's bankruptcy plan was confirmed MCAR, plaintiff, substituted into the case for Mirant. Commerzbank and other lenders, defendants, filed a motion to dismiss based on Rules 12(b)(1) and 12(b)(6). The district court subsequently denied defendants' motion to dismiss based on plaintiff's alleged lack of standing. Thereafter, the district court granted summary judgment for defendants. Both sides appealed. While the court agreed that the district court correctly determined that there was standing to bring the avoidance claim, the court vacated the judgment of dismissal because the district court erroneously applied Georgia state law rather than New York state law to the avoidance claim. View "MC Asset Recovery LLC v. Commerzbank A.G., et al." on Justia Law

In a bankruptcy adversary proceeding, Capco brought claims of fraud and various business torts against Ryder, Tana, TRT, and Tristone. The claims arose out of a transaction in which Capco purchased from Tana certain oil and gas reserves located in the Gulf of Mexico (the Properties). The bankruptcy court granted summary judgment in favor of Ryder, Tana, TRT, and Tristone and dismissed the claims. The court held that Capco failed to present evidence to demonstrate a genuine issue of material fact about whether Ryder was contracted to provide an independent reevaluation of the Properties and advice at the meeting regarding Capco's decision to close on the Properties. The court also held that because the purchase and sale agreement contained a clear intent to disclaim reliance, the lower courts correctly held that Capco was unable to claim fraudulent inducement based on the prior representations of Tana, TRT, and Tristone. Accordingly, the judgment was affirmed. View "Amco Energy, Inc., et al. v. Tana Exploration Co., et al." on Justia Law

This action involved a challenge to the decision by a purchaser to terminate a share purchase agreement and related consulting services agreement based on the purchaser's contention that certain conditions precedent to closing those agreements had not been met by the seller. Purchaser brought an action for declaratory judgment and injunctive relief, seeking a determination that it properly terminated the share purchase and consulting services agreements and was entitled to the return of its down payment on the purchase price from escrow. The court found that the agreements between the parties unambiguously provided that the Development Fees were contingent on the commencement of actual development of the projects and that the purchaser was under no obligation to develop the projects. Therefore, the court granted purchaser's motion for partial summary judgment on that issue and held that seller was not entitled to any Development Fees as a result of purchaser's decision to terminate the transaction. View "Invenergy Solar Dev. LLC v. Gonergy Caribbean Sarl, et al." on Justia Law

Chevron, the franchisor, brought suit for declaratory judgment against one of its franchised dealers, M&M Petroleum Services, Inc. M&M responded with a counterclaim of its own, a counterclaim that was not only found to be frivolous, but the product of perjury and other misconduct. The court held that had M&M merely defended Chevron's suit, it could not have been held liable for attorneys' fees. The court held, however, that in affirmatively bringing a counterclaim that was reasonably found to be frivilous, M&M opened itself up to liability for attorneys' fees under the Petroleum Marketing Practices Act, 15 U.S.C. 2805(d)(3). Therefore, the district court did not err in determining that Chevron was eligible to recover attorneys' fees, nor did the district court abuse its discretion in determining that M&M's counterclaim was frivolous and awarding attorneys' fees to Chevron under section 2805(d)(3). View "Chevron U.S.A. Inc. v. M&M Petroleum Servs, Inc." on Justia Law

This case arose out of a sale-leaseback transaction that occurred in 2001. On July 10, 2011, the seller-lessees' parent company announced plans for a proposed transaction whereby it would seek a new credit facility and undergo an internal reorganization. As part of a subsequent reorganization, substantially all of its profitable power generating facilities would be transferred from existing subsidiaries to new "bankruptcy remote" subsidiaries, except for two financially weakened power plants. On July, 22, 2011, plaintiffs brought this action seeking to temporarily restrain the closing of the proposed transaction on the grounds that it violated the successor obligor provisions of the guaranties and would constitute a fraudulent transfer. The court found it more appropriate to analyze plaintiffs' motion for a temporary restraining order under the heightened standard for a preliminary injunction. Having considered the record, the court held that plaintiffs have failed to show either a probability of success on the merits of their breach of contract and fraudulent transfer claims or the existence of imminent irreparable harm if the transaction was not enjoined. Therefore, the court denied plaintiffs' application for injunctive relief. View "Roseton Ol, LLC, et al. v. Dynegy Holdings Inc." on Justia Law

This case involved two related oil and gas mineral lease disputes that were jointly tried. At issue was whether limitations barred the Marshalls' (respondents and lessors) fraud claim against BP America Production Co., et al. (the lessee and operator), and whether Vaquillas Ranch Co., Ltd., et al. (lessors) lost title by adverse possession after Wagner Oil Co. (successors-in-interest) succeeded to BP's interests, took over the operations, and produced and paid Vaquillas royalties for nearly twenty years. The court held that because the Marshalls' injury was not inherently undiscoverable and BP's fraudulent representations about its good faith efforts to develop the well could have been discovered with reasonable diligence before limitations expired, neither the discovery rule nor fraudulent concealment extended limitations. Accordingly, the Marshalls' fraud claims against BP were time-barred. The court further held that by paying a clearly labeled royalty to Vaquillas, Wagner sufficiently asserted its intent to oust Vaquillas to acquire the lease by adverse possession. View "BP America Prod. Co., et al. v. Marshall, et al." on Justia Law