Justia Corporate Compliance Opinion Summaries

Polar Holding was sole shareholder of PMC, a company engaged in the petroleum-additive business. PMC was in default on a loan for which it had pledged valuable intellectual property as collateral, and Polar Holding was in the midst of an internal dispute between members of its board of directors regarding business strategy for PMC. One of the directors, Socia, formed a competing company, Petroleum, for the purpose of acquiring PMC’s promissory note and collateral from the holder of PMC’s loan. Petroleum brought suit against Woodward, an escrow agent in possession of PMC’s collateral, alleging that PMC was in default on the payment of its promissory note. Polar Holding and PMC intervened and filed counterclaims against Petroleum and a third-party complaint against additional parties, including Socia. Polar Holding and PMC allleged breach of fiduciary duty, civil conspiracy, and tortious interference. After PMC filed for bankruptcy, its claims became the property of the bankruptcy trustee. Polar Holding’s claims were later dismissed. The Sixth Circuit affirmed dismissal of a tortious interference claim as addressed by the district court, but reversed dismissal of a breach-of-fiduciary-duty claim against Socia and a civil-conspiracy claim against individual third-party defendants.View "Petroleum Enhancer, L.L.C. v. Woodward" on Justia Law

Appellants Consipio Holding, BV; Ilan Bunimovitz; Tisbury Services, Inc.; and Claudio Gianascio (collectively, Consipio) are shareholders of Private Media Group, Inc. (PRVT). In August 2010, Consipio filed a complaint in the Nevada district court, seeking injunctive relief and the appointment of a receiver for PRVT. Consipio also asserted derivative claims on behalf of PRVT against PRVT's former CEO and president, Berth H. Milton, Jr., and against officer and director respondents Johan Carlberg (PRVT director), Peter Dixinger (PRVT director), Bo Rodebrant (PRVT director), Johan Gillborg (former PRVT CFO), and Philip Christmas (PRVT subsidiary CFO). The claims focused on respondents' alleged conduct in assisting Milton, Jr., to financially harm PRVT for their personal gain. The complaint alleged that respondents assisted Milton, Jr., in obtaining significant loans for himself and entities he controls. It further stated that respondents failed to demand repayment on these loans and that they helped Milton, Jr. by removing funds from PRVT and concealing the wrongdoing. Given these allegations, Consipio contended that respondents collectively were guilty of misfeasance, malfeasance, and breach of their fiduciary duties. The issue before the Supreme Court was whether Nevada courts could properly exercise personal jurisdiction over nonresident officers and directors who directly harm a Nevada corporation. The Court concluded that they can. In this case, the district court failed to conduct adequate factual analysis to determine whether it could properly exercise personal jurisdiction over the respondents before dismissing the complaint against them. Accordingly, the Supreme Court vacated the dismissal order and remanded this case to the district court for further proceedings.View "Consipio Holding, BV v. Carlberg" on Justia Law

Terex manufactures equipment. Apuzzo was its Chief Financial Officer. URI is an equipment rental company. Nolan was URI’s Chief Financial Officer. URI and Nolan, carried out fraudulent “sale-leaseback” transactions, to allow URI to recognize revenue prematurely and inflate profits. URI sold used equipment to GECC, a financing corporation, and leased it back. To obtain GECC’s participation, URI convinced Terex to agree to resell the equipment after the lease periods. Terex guaranteed that GECC would receive at least 96 percent of the purchase price for the equipment. URI secretly agreed to indemnify Terex for losses from the guarantee and to purchase new equipment from Terex. Apuzzo knew that if the extent of the transactions was transparent, URI would not be able to claim increased revenue under Generally Accepted Accounting Principles. Apuzzo disguised URI’s risks and obligations, and approved inflated invoices to conceal indemnifications. Following transactions under the scheme, the SEC charged that Apuzzo aided and abetted securities laws violations through his role in a fraudulent accounting scheme. The district court dismissed; the complaint plausibly alleged that Apuzzo had actual knowledge of the primary violation, but did not allege “substantial assistance.” The Second Circuit reversed, holding that Apuzzo associated himself with the venture, participated in it as in something that he wished to bring about, sought by his action to make it succeed. . View "Sec. & Exch. Comm'n v. Apuzzo" on Justia Law

Plaintiffs, including a California corporation (Corporation), filed a lawsuit for property damage against Defendants. Before trial, Defendants learned the state had suspended Corporation's corporate powers for nonpayment of taxes. A jury returned a verdict in favor of Defendants. Plaintiffs, including Corporation, appealed. On December 1, 2011, Defendants filed separate motions to dismiss Corporation's appeals because its corporate powers were still suspended. Corporation presented documentation showing its corporate powers had been revived on December 8, 2011 and argued that this revival made its appeal effective. The court of appeals denied the motions. Defendants petitioned for review. At issue was whether a corporation that files notices of appeal while its corporate powers are suspended may proceed with the appeals after those powers have been revived, even if the revival occurs after the time to appeal has expired. Relying on precedent, the Supreme Court affirmed, holding that the appeals may proceed. View "Bourhis v. Lord" on Justia Law

Petitioner Lisa McBride was an accountant who worked as Respondent Peak Wellness Center’s business manager for about nine years. Peak terminated her in 2009, citing job performance and morale issues. Petitioner claimed she was terminated in retaliation for bringing various accounting improprieties to the attention of Peak’s Board of Directors. Petitioner brought several federal and state-law claims against Peak: (1) whistleblower retaliation under the federal False Claims Act (FCA); (2) violations of the federal Fair Labor Standards Act (FLSA); (3) breach of employment contract; (4) breach of implied covenant of good faith and fair dealing; (5) defamation; and (6) a federal sex discrimination claim under Title VII of the Civil Rights Act. After discovery, Peak moved for summary judgment on all claims, and the district court granted the motion. Petitioner appealed, arguing that significant issues of material fact remained unresolved and that her claims should have proceeded to trial. She also appealed district court’s denial of an evidentiary motion. Finding no error in the district court’s decision, the Tenth Circuit affirmed its grant of summary judgment in favor of Peak.View "McBride v. Peak Wellness Center Inc." on Justia Law

Plaintiffs are holders of Savient’s 4.75% convertible senior notes due in 2018, which are unsecured and subject to the terms of an indenture. Collectively, Plaintiffs own a face value of $48,709,000, approximately 40% of the outstanding Notes. Defendants are members of Savient’s board of directors USBNA serves as trustee for the Indenture governing the Notes. Following dismal sales of its new drug, KRYSTEXXA, Savient’s Board approved a financing transaction to exchange some existing unsecured Notes for new senior secured notes with a later maturity date. Through the Exchange, Savient exchanged around $108 million in Notes, raised around $44 million in new capital, and issued additional SSDNs with a face value of approximately $63 million. Like the Notes, the SSDNs are subject to an indenture for which USBNA serves as trustee. Plaintiffs sought a declaration that Savient was insolvent and brought derivative claims alleging waste and breach of fiduciary duty in connection with the Exchange Transaction; alleged breach of fiduciary duty and waste claims in connection with the Board’s approval of retention awards for certain Savient executives. The chancellor dismissed the receivership claim for lack of standing and granted a declaration that an Event of Default has not occurred.View "Tang Capital Partners LP, v. Norton" on Justia Law

A jury returned a special verdict that: (a) awarded damages against an attorney and his girlfriend based upon the jury's finding that they had breached their fiduciary duties to a former client of the attorney by purchasing half of his stock in a closely held corporation for less than its fair market value; and (b) cancelled debts owing by the corporation to the attorney and his girlfriend based upon the jury's finding that they had breached their fiduciary duties to a shareholder, the former client's widow, by making loans to the corporation. The district court granted a new trial on the ground that there was insufficient evidence to justify the verdict, and this appeal followed. Finding sufficient evidence to support the jury's verdict, the Supreme Court affirmed the grant of a new trial.View "Berry v. McFarland" on Justia Law

Peppel, former President, CEO, and Chairman of the Board of Directors of MCSi, a publicly-traded communications-technology company, conspired with CFO Stanley to falsify MCSi accounting records and financial statements in order to conceal the actual earnings from shareholders, while laundering proceeds from the sale of his own shares in a public stock offering. Peppel pleaded guilty to conspiracy to commit securities, mail, and wire fraud, 18 U.S.C. 1371 and 1349; willful false certification of a financial report by a corporate officer,18 U.S.C. 1350; and money laundering, 18 U.S.C. 1957. The parties stipulated to use of the 2002 Sentencing Guidelines Manual The district court heard testimony and received reports on five competing amount-of-loss theories and, based almost solely on its estimation of Peppel as “a remarkably good man,” varied downward drastically from this advisory range, imposing a custodial sentence of only seven days—a 99.9975% reduction. The Sixth Circuit vacated, holding that the district court abused its discretion by imposing an unreasonably low sentence, but did not err in calculating the amount of loss or number of victims. View "United States v. Peppel" on Justia Law

This case concerned attorney fees under the dissenters' rights provisions of the Washington Limited Liability Company Act (LLC Act). The issue was first considered two years ago when the Supreme Court reversed the award of attorney fees imposed on Humphrey Industries Ltd. (Humphrey) and remanded to the trial court to reconsider an award of attorney fees in Humphrey's favor. On remand, the trial court awarded Humphrey part of its fees but also reinstated part of the attorney fee award against Humphrey that the Supreme Court had reversed. Humphrey appealed directly to the Supreme Court, contending that the trial court on remand failed to follow the Supreme Court's order. Upon review, the Supreme Court held that the trial court erred by imposing fees on Humphrey. View "Humphrey Indus., Ltd. v. Clay St. Assocs." on Justia Law

The Pennsylvania Supreme Court accepted certification from the United States Court of Appeals for the Third Circuit to address the exclusiveness of a statutory appraisal remedy provided to minority shareholders in certain merger scenarios under Pennsylvania corporate law. Where there is a fair value dispute, the BCL provides for post-merger judicial valuation or appraisal of the shares. Mitchell Partners, L.P., was a minority shareholder of Irex Corporation. In 2006, Irex participated in a merger structured so that some minority shareholders would be "cashed out" and would not receive an equity interest in the surviving corporation, a wholly owned subsidiary of North Lime Holdings Corporation. Mitchell objected to the acquisition. The merger proceeded nonetheless, and Irex commenced valuation proceedings in state court to address the dispute with Mitchell. Meanwhile, Mitchell pursued common law remedies in a diversity action in federal court, naming as defendants Irex, its directors, most of its officers, and North Lime. The defendants sought dismissal on the ground that, under Section 1105 of the BCL, judicial valuation was the sole remedy available to dissenting shareholders in the post-merger timeframe. A divided three-judge panel of the Third Circuit reversed the superior court in favor of Mitchell. Defendants sought rehearing, and the Governor of Pennsylvania and several business groups moved for leave to file supportive amicus briefs. The Governor expressed particular concern that the Third Circuit had interpreted the BCL's provisions relating to dissenting shareholders' rights in a manner inconsistent with Commonwealth case law. Accordingly, he urged the Third Circuit to grant rehearing and certify a question of law to the Supreme Court. Upon review, the Supreme Court, in response to the certified question, Section 1105 (of the BCL) "precludes postmerger remedies other than appraisal only in the absence of fraud or fundamental unfairness."View "Mitchell Partners, L.P., Aplt v. IREX Corporation" on Justia Law