Justia Corporate Compliance Opinion Summaries

This matter involved the interpretation of a limited liability company operating agreement. Petitioner (Showell) was a member of an accounting firm (Hoyt) and respondents (Pusey and Hatter) were the remaining members of the LLC at the time. In early 2007, Showell "retired" from Hoyt. Showell subsequently asked the court to construe the provisions of the Hoyt Operating Agreement to determine what value, if any, Showell was due for his interest in Hoyt as a consequence of his departure from the company. The court held that Showell was entitled to receive his share of the liquidation value of Hoyt as of the date of his "retirement" from the company. View "Showell v. William H. Pusey, Richard H. Hatter and Robert M. Hoyt & Co., LLC" on Justia Law

Debtor, a limited liability company, was formed by five members, who made up a Board of Managers. Forte had a 12% interest. After his requests to inspect of business records were denied, Forte sued Lynch, the member with the highest percentage interest. In the six months before filing for Chapter 11 bankruptcy, the company paid Forte $215,000 as part of the settlement. The bankruptcy court found that Forte qualified as an "insider" (11 U.S.C. 547(b)(4)(B)) and that the trustee could void and recover the transfers. The district court and Seventh Circuit affirmed. Insider status is not just a matter of title; Forte retained voting rights in the company, held a formal position on the Board, and did not resign until after he received the transferred funds. View "Forte v. Brandt" on Justia Law

Shareholders implemented a plan to obtain majority ownership and buy out non-participating shareholders. Among other claims, non-participants allege that the participant-directors influenced a special committee formed to consider the fair value of shares held by non-participants. A state appraisal action is ongoing. The federal district court dismissed a suit alleging breach of fiduciary duty and unjust enrichment. The Third Circuit reversed and remanded. The Pennsylvania Supreme Court has not address whether a statute providing for appraisal of the value of shares of minority shareholders who are "squeezed out" in a cash-out merger precludes all other remedies; the court predicted that it would hold that the statute does not exclude the possibility of other claims. View "Mitchell Partners L.P. v. Irex Corp" on Justia Law

This case concerned the bankruptcy estate of Qualia Clinical Service, Inc. The estate's Chapter 7 Trustee sought to avoid as a preferential transfer a security interest recorded by one of Qualia's creditors shortly before the bankruptcy petition. The bankruptcy court and the Bankruptcy Appellate Panel (BAP) held the security interest voidable. The court held that the bankruptcy court and the BAP properly applied 11 U.S.C. 547(c)(5)(A) to conclude that the preferential transfer in this case, though it concerned an interest in accounts receivable, improved Inova Capital Funding, LLC's position as against Qualia's other creditors and so was not exempt from avoidance under that subsection. The court found Inova's remaining arguments unpersuasive. View "Lange v. Inova Capital Funding, LLC, et al." on Justia Law

Robert J. Henrichs, Derenty Tabios, and Robert E. Burk were shareholders and former directors of Chugach Alaska Corporation who ran for election to the Chugach board in 2005. These former directors sued Chugach because their names were excluded from the board’s corporate proxy materials and because Chugach did not provide them with shareholder information for their own proxy campaigns within the time frame they demanded. The superior court granted Chugach summary judgment on all claims and the former directors appealed. Upon review, the Supreme Court affirmed because Chugach was not required to deliver the information the former directors demanded and because Chugach’s conduct did not otherwise violate their rights as board candidates. View "Henrichs v. Chugach Alaska Corporation" on Justia Law

Plaintiff alleged that defendant had a personal bank account at Fulton Financial Corporation (Fulton), of which his wife could be a joint holder. Plaintiff sought a temporary restraining order enjoining both defendant and his wife from using the funds or removing them from Fulton, pending a final disposition of its claim that the funds were wrongfully removed by defendant from plaintiff's account. The court held that while the complaint stated a colorable claim, the court was unpersuaded that irreparable harm would result absent the entry of a restraining order, ex parte. The court also held that where, as here, the plaintiff sought to freeze the funds of an account legally held, not only by the alleged wrongdoer but jointly by an innocent third party, a request for ex parte action raised concerns of due process. Therefore, since plaintiff failed to show that irreparable harm would occur absent entry of a temporary restraining order ex parte, the court deferred decision on the restraining order request pending service and an opportunity for defendant to be heard. View "Smart Home, Inc. v. Selway, et al." on Justia Law

Plaintiff appealed the district court's grant of summary judgment to defendant on his claim of malicious prosecution under Arkansas law. The district court held that plaintiff failed to present evidence sufficient to withstand summary judgment on two of the five elements necessary to sustain his claim. The court held that the district court erred in holding that the evidence was insufficient as a matter of law to sustain plaintiff's claim that defendant brought suit against him on the guaranty without probable cause. The court also held that a jury must decide what was defendant's motive or purpose in suing plaintiff if it in fact understood it had no reasonable chance of prevailing on the merits of its claim against plaintiff. View "Stokes v. Southern States Cooperative, Inc." on Justia Law

This tax case concerned the procedures to be followed when the IRS conducted a partnership proceeding under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), I.R.C. 6221-6233. Plaintiffs, individual taxpayers and limited partners in partnerships that were the subject of such proceedings, filed suit on grounds that the lack of deficiency notices rendered the IRS's assessments invalid. At issue was whether the IRS was required to issue notices of deficiency before assessing additional tax payments from plaintiffs. The court held that the assessments in this case amounted to computational adjustments and therefore, no deficiency notices were necessary. The court noted that the three remaining questions the court put to the parties as part of en banc rehearing each presumed that a deficiency notice was required. Because the court's holding here definitively contradicted that presumption, the court need not analyze those questions. Accordingly, the court affirmed the judgement of the Court of Federal Claims. View "Bush, et al. v. United States; Shelton v. United States" on Justia Law

This appeal stemmed from numerous trademark and unfair competition claims over the name "Patsy's." Patsy's Italian Restaurant appealed, and Patsy's Pizzeria cross-appealed, from a judgment of the district court after a jury trial on claims brought pursuant to trademark and unfair competition law. The court upheld the district court's jury instructions; affirmed the district court's refusal to grant a new trial on the issue of whether Patsy's Pizzeria made fraudulent statements to the Patent and Trademark Office, as well as its refusal to vacate the jury's verdict that Patsy's Italian Restaurant did not fraudulently obtain its trademark registrations; affirmed the district court's refusal to reinstate Patsy's Pizzeria's trademark registrations; and upheld the district court's denial of attorneys' fees and injunctive relief. Accordingly, the court affirmed the judgment of the district court. View "Patsy's Italian Restaurant, Inc., et al. v. Banas, et al." on Justia Law

WPP Luxembourg Gamma Three Sarl (WPP) appealed from the district court's dismissal of the amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendant and cross-appellants cross-appealed the district court's decision to dismiss some of WPP's claims without prejudice. WPP generally alleged violations of the Securities and Exchange Act of 1934, 15 U.S.C. 78(a), that amidst large operating losses unknown to investors, Spot Runner executives solicited WPP to buy shares in it at the same time that executives of the company were selling personally owned shares. The court affirmed the dismissal of the Rule 10b-5(a) and (c) fraudulent scheme against all of the defendants, the dismissal of the Rule 10b-5(b) fraudulent omissions claim against the general counsel for Spot Runner and Spot Runner, and the dismissal of the Rule 10b-5 insider trading claim against Spot Runner. The court reversed the dismissal of the Rule 10b-5(b) omission claims against the founders of Spot Runner. View "WPP Luxembourg Gamma Three Sarl, et al. v. Spot Runner, Inc., et al." on Justia Law