Justia Corporate Compliance Opinion Summaries

Petitioners argued that defendants - who were the then-parent company and directors of Aristotle Corporation - breached their fiduciary duties by not disclosing all material facts in connection with a short-form merger under 8 Del. C. 253. At issue was whether petitioners, who already had the right to seek appraisal in connection with a section 253 merger, could add an additional claim alleging that the directors breached their fiduciary duty to disclose the material facts necessary for the stockholders to determine whether to seek appraisal when the only purpose of pressing the disclosure claim was to give petitioners the redundant right of a "quasi" version for something that they already possessed? Because petitioners have not alleged that they have suffered any cognizable injury that gave rise to standing, and because they were therefore asking in these unique circumstances for an improper advisory decision, the court granted defendants' motion to dismiss.View "In Re: Appraisal Of The Aristotle Corp." on Justia Law

Sterling, a limited liability corporation engaged in the business of importing and selling Iraqi currency, hired Grossi, a company that specialized in web-based marketing strategies, in an effort to create an internet-based sales platform. After the parties' dispute over the modification of a compensation scheme by which Grossi was paid, Sterling filed suit against Grossi seeking a temporary restraining order, interlocutory and permanent injunctions, and damages. Grossi subsequently appealed the grant of interlocutory injunction in favor of Sterling, contending that the trial court erred by entering an interlocutory injunction that failed to preserve the status quo. The court found that the trial court did not abuse its discretion by entering the injunction in light of Grossi's threats to do harm to the website. The court also rejected Grossi's contention that the interlocutory order was, in reality, a mandatory, permanent injunction affecting the rights of the parties. Accordingly, the judgment was affirmed.View "Grossi Consulting, LLC, et al. v. Sterling Currency Group, LLC" on Justia Law

In this original proceeding Allcat, a limited partnership, and one of its limited partners sought an order directing the Comptroller to refund franchise taxes Allcat paid that were attributable to partnership income allocated, but not distributed, to its natural-person partners. Allcat claimed it was entitled to a refund for two reasons. First, the tax facially violated Article VIII, Section 24 of the Texas Constitution because it was a tax on the net incomes of its natural-person partners that was not approved in a statewide referendum. Second, as applied by the Comptroller, to Allcat and its partners, the franchise tax violated Article VIII, Section 1(a) of the Constitution, which required taxation to be equal and uniform. The court held that: (1) the tax was not a tax imposed on the net incomes of the individual partners, thus it did not facially violated Article VIII, Section 24; and (2) the court did not have jurisdiction to consider the equal and uniform challenge.View "In re Allcat Claims Service, L.P. and John Weakly" on Justia Law

This was an action to inspect the books and records of a corporation under 8 Del. C. 220. A shareholder brought this action after a series of reports and events, including the resignation of the company's independent auditor, raised suspicions that the company had engaged in fraud and falsified its financial statements. The court found that the shareholder had established proper purposes to inspect the books and records of the company. Therefore, the court granted the shareholder's demand as to the documents at issue, but only to the extent the documents were necessary for one of his proper purposes. The court also denied the company's request to stay this action.View "Paul v. China MediaExpress Holdings, Inc." on Justia Law

Plaintiffs filed this lawsuit on behalf of a class of stockholders of Occam. Defendants moved for sanctions against all plaintiffs other than Derek Sheeler for trading on the basis of confidential information obtained in this litigation. With respect to Michael Steinhardt and the funds, the motion was granted. Consistent with prior rulings by this court when confronted with representative plaintiffs who have traded while serving in a fiduciary capacity, Steinhardt and the funds were dismissed from the case with prejudice, barred from receiving any recovery from the litigation, required to self-report to the SEC, directed to disclose their improper trading in any future application to serve as lead plaintiff, and ordered to disgorge profits. With respect to Herbert Chen, the motion was denied.View "Steinhardt, et al. v. Howard-Anderson, et al." on Justia Law

Plaintiff challenged two transactions in this purported class action brought on behalf of the former public holders of LP units of EPE. On behalf of the first of the two purported classes, plaintiff challenged EPE's sale of Teppco GP to Enterprise Products (the 2009 Sale). On behalf of the second purported class, plaintiff challenged the merger of EPE into a wholly-owned subsidiary of Enterprise Products (the Merger). Defendants moved to dismiss all claims, or in the alternative, to stay this action pending the resolution of a related case. The court held that plaintiff had standing to bring the claims asserted in Counts I, III, and V on behalf of the public holders of EPE LP units who continuously held their units from the date of the 2009 Sale through the effective date of the Merger. However, all six counts were dismissed for failure to state a claim. Accordingly, defendants' motion to dismiss was granted.View "Gerber v. Enterprise Products Holdings, LLC, et al." on Justia Law

Great-West asserted claims against defendants in an eight count complaint and the court granted defendant's motion to dismiss in part. At issue are the remaining counts of the complaint which revolve around Section 12.2(c) of the LP Agreement. The court held that Great-West's motion for partial summary judgment was denied, except as to Count I, which was granted. Great-West was entitled to a declaration that the Expense Assumption could not increase until TH Lee had negotiated in good faith. Defendants' motion for summary judgment was denied as to Counts II and VII, and granted as to Counts IV, V, and VI. Great-West's claims for mistake and fraud failed as a matter of law.View "Great-West Investors LP v. Thomas H. Lee Partners, L.P., et al." on Justia Law

The city of Winchester and its collector (Winchester) filed a class action lawsuit against Charter Communications on behalf of itself and other similarly situated Missouri municipal corporations and political subdivisions, seeking a declaratory judgment requiring Charter and other telephone service providers to comply with ordinances requiring them to pay a license tax on gross receipts derived from fees and services connected to their operations and an order requiring Charter to pay all license taxes owed to the class. The circuit court struck Winchester's claims on the basis of Mo. Rev. Stat. 71.675, which bars cities and towns from serving as class representatives in suits to enforce or collect business license taxes imposed on telecommunications companies. The Supreme Court quashed the court's preliminary writ of prohibition and granted Winchester's request for a permanent writ of mandamus directing the trial court to vacate its order, holding that the court exceeded its authority in striking Winchester's class action allegations pursuant to section 71.675, as the statute violated Mo. Const. art. V, 5 because it amended a procedural rule of the Court.View "State ex rel. Collector of Winchester v. Circuit Court (Jamison)" on Justia Law

Department of Health and Human Services (HHS) regulations implementing the 2010 Patient Protection and Affordable Care Act (ACA) require that employers’ group health plans furnish preventive care and screenings for women without cost sharing requirements, 42 U.S.C. 300gg–13(a)(4). Nonexempt employers must provide coverage for 20 FDA-approved contraceptive methods, including four that may have the effect of preventing a fertilized egg from developing. Religious employers, such as churches, are exempt from the contraceptive mandate. HHS has effectively exempted religious nonprofit organizations; an insurer must exclude contraceptive coverage from such an employer’s plan and provide participants with separate payments for contraceptive services. Closely held for-profit corporations sought an injunction under the 1993 Religious Freedom Restoration Act (RFRA), which prohibits the government from substantially burdening a person’s exercise of religion even by a rule of general applicability unless it demonstrates that imposing the burden is the least restrictive means of furthering a compelling governmental interest, 42 U.S.C. 2000bb–1(a), (b). As amended by the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA), RFRA covers “any exercise of religion, whether or not compelled by, or central to, a system of religious belief.” The Third Circuit held that a for-profit corporation could not “engage in religious exercise” under RFRA and that the mandate imposed no requirements on corporate owners in their personal capacity. The Tenth Circuit held that the businesses are “persons” under RFRA; that the contraceptive mandate substantially burdened their religious exercise; and that HHS had not demonstrated that the mandate was the “least restrictive means” of furthering a compelling governmental interest.The Supreme Court ruled in favor of the businesses, holding that RFRA applies to regulations that govern the activities of closely held for-profit corporations. The Court declined to “leave merchants with a difficult choice” of giving up the right to seek judicial protection of their religious liberty or forgoing the benefits of operating as corporations. Nothing in RFRA suggests intent to depart from the Dictionary Act definition of “person,” which includes corporations, 1 U.S.C.1; no definition of “person” includes natural persons and nonprofit corporations, but excludes for-profit corporations. “Any suggestion that for-profit corporations are incapable of exercising religion because their purpose is simply to make money flies in the face of modern corporate law.” The Court rejected arguments based on the difficulty of ascertaining the “beliefs” of large, publicly traded corporations and that the mandate itself requires only insurance coverage. If the plaintiff companies refuse to provide contraceptive coverage, they face severe economic consequences; the government failed to show that the contraceptive mandate is the least restrictive means of furthering a compelling interest in guaranteeing cost-free access to the four challenged contraceptive methods. The government could assume the cost of providing the four contraceptives or could extend the accommodation already established for religious nonprofit organizations. The Court noted that its decision concerns only the contraceptive mandate, not all insurance-coverage mandates, e.g., for vaccinations or blood transfusions. View "Burwell v. Hobby Lobby Stores, Inc." on Justia Law

Fifth Third maintains a defined-contribution retirement savings plan for its employees. Participants may direct their contributions into any of several investment options, including an “employee stock ownership plan” (ESOP), which invests primarily in Fifth Third stock. Former participants sued, alleging breach of the fiduciary duty of prudence imposed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1104(a)(1)(B) in that the defendants should have known—on the basis of both public information and inside information available to Fifth Third officers—that the stock was overpriced and risky. The price of Fifth Third stock fell, reducing plaintiffs’ retirement savings. The district court dismissed; the Sixth Circuit reversed. A unanimous Supreme Court vacated. ESOP fiduciaries are not entitled to any special presumption of prudence, but are subject to the same duty that applies to ERISA fiduciaries in general, except that they need not diversify the fund’s assets. There is no requirement that plaintiffs allege that the employer was, for example, on the “brink of collapse.” Where a stock is publicly traded, allegations that a fiduciary should have recognized, on the basis of publicly available information, that the market was over- or under-valuing the stock are generally implausible and insufficient to state a claim. To state a claim, a complaint must plausibly allege an alternative action that could have been taken, that would have been legal, and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it. ERISA’s duty of prudence never requires a fiduciary to break the law, so a fiduciary cannot be imprudent for failing to buy or sell in violation of insider trading laws. An allegation that fiduciaries failed to decide, based on negative inside information, to refrain from making additional stock purchases or failed to publicly disclose that information so that the stock would no longer be overvalued, requires courts to consider possible conflicts with complex insider trading and corporate disclosure laws. Courts confronted with such claims must also consider whether the complaint has plausibly alleged that a prudent fiduciary in the same position could not have concluded that stopping purchases or publicly disclosing negative information would do more harm than good to the fund. View "Fifth Third Bancorp v. Dudenhoeffer" on Justia Law