Justia Corporate Compliance Opinion Summaries

This case arose when taxpayer transferred membership units in a family-owned LLC partly as a gift and partly by a sale to two trusts and coupled the transfers with simultaneous gifts of LLC units to two charitable foundations. Subsequent to an IRS audit, which determined that the units had been undervalued, the foundations discovered they would receive additional units. At issue was whether the taxpayer was entitled to a charitable deduction equal to the value of the additional units the foundations would receive. The court held that Treasury Regulation 25.2522(c)-3(b)(1) did not bar a charitable deduction equal to the value of the additional units the foundations would receive. Therefore, the court affirmed the judgment. View "Commissioner of Internal Revenue v. Estate of Anne Y. Petter, et al." on Justia Law

This case stemmed from credit agreements Lehman entities entered into with Palmdale Hills, LLC entities. Palmdale filed for chapter 11 bankruptcy in November 2008 and Lehman subsequently filed eight motions for relief from Palmdale's stay to foreclose on the collateral securing the loans that were in default. The court held that the Bankruptcy Appellate Panel (BAP) correctly held that Lehman had standing to appeal the bankruptcy court's finding that the automatic stay did not prevent equitably subordinating Lehman's claims. The court also held that the BAP correctly determined that the appeal was not moot. The court further held that the BAP correctly determined that Lehman's automatic stay prevented Lehman's claims from being subordinated. Accordingly the court affirmed the BAP's judgment. View "Palmdale Hills Property, LLC v. Lehman Commercial Paper, Inc." on Justia Law

Appellant, a Delaware corporation with its principal place of business in St. Louis, Missouri, sued appellee, a Spanish corporation with its principal place of business in Barcelona, Spain, for breach of contract and misappropriation of trade secrets in the United States District Court for the Eastern District of Missouri. At issue was whether the district court properly granted appellee's motion to dismiss for lack of personal jurisdiction, declined to reach the forum-non-conveniens argument, and denied the motion for failure to state a claim. The court held that the proper application of the five-factor test set forth in Johnson v. Arden supported hearing the present case in Missouri. Therefore, the court reversed the district court's decision to dismiss the complaint for lack of personal jurisdiction and remanded for further proceedings. As a preliminary matter, the court held that it would address the forum-non-conveniens argument because no additional facts were needed to resolve the issue. The court held, however, that because the plaintiff's choice of forum was entitled to significant deference and because the public-interest factors favor deciding the case in Missouri, the court did not find that the present case presented the exceptional circumstances necessary to invoke the doctrine of forum-non-conveniens. Therefore, the court denied appellee's motion to dismiss based on this ground. The court further held that in denying appellee's motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the district court did so without analysis and without prejudice. Therefore, the issue should be left for the district court to consider on remand. View "KV Pharmaceutical Co. v. J. Uriach & CIA" on Justia Law

Plaintiffs James Adams, Stanley Dye and Ed Holcombe were all shareholders in Altrust Financial Services, Inc. They sued Altrust, the Peoples Bank of Alabama (collectively, Altrust) and Dixon Hughes, LLC, Altrust's public-accounting firm, for violating the Alabama Securities Act. Altrust is a holding company that fully owns, controls and directs the operations of the Bank. Altrust and the Bank share common officers and directors and issue consolidated financial statements. Shareholders voted to reorganize the company in 2008 from a publicly held company to a privately held company. The move would have freed the company of certain reporting obligations imposed by the federal Securities Exchange Act and allowed the company to elect Subchapter S status for tax purposes. Relying on information in a proxy statement, Plaintiffs elected not to sell their shares of Altrust stock and instead voted for reorganization. Plaintiffs alleged that the proxy statement and financial reports contained material misrepresentations and omissions that induced them to ultimately sign shareholder agreements that made them shareholders in the newly reorganized Altrust. Plaintiffs contended that if (in their view) instances of mismanagement, self-dealing, interested-party transactions and "skewing" of company liabilities had been fully disclosed, they would have elected to sell their shares rather than remain as shareholders. Upon review, the Supreme Court found that Plaintiffs' allegations were not specific to them but to all shareholders, and as such, they did not have standing to assert a direct action against the company. Because Plaintiffs did not have standing to assert claims against Altrust, they also lacked standing to assert professional negligence claims against the accounting firm. The Court remanded the case for further proceedings. View "Altrust Financial Services, Inc. v. Adams" on Justia Law

Plaintiff, the SEC, appealed from a judgment dismissing its complaint against Marc J. Gabelli, the portfolio manager of the mutual fund Gabelli Global Growth Fund (GGGF or the Fund), and Bruce Alpert, the chief operating officer for the Fund's adviser, Gabelli Funds, LLC (Adviser). The SEC's complaint charged defendants with failing to disclose favorable treatment accorded one GGGF investor in preference to other investors. As a preliminary matter, the court limited its jurisdiction to the SEC's appeal. The court held that the complaint adequately stated claims against Alpert for violations of Section 17(a) of the Securities Act of 1933, 15 U.S.C. 77q(a), and Section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b). The court also held that the SEC's prayer for civil penalties survived defendants' motions to dismiss and must be reinstated where the court found that at this stage in the litigation, defendants have not met their burden of demonstrating that a reasonably diligent plaintiff would have discovered this fraud prior to September 2003. The court further held that the complaint sufficiently plead a reasonable likelihood of future violations and thus reversed the district court's dismissal of the SEC's prayer for injunctive relief. Accordingly, the court granted the SEC's appeal in all respects, dismissed the cross-appeals for want of appellate jurisdiction, and remanded for further proceedings. View "Securities and Exchange Commission v. Gabelli, et al." on Justia Law

This criminal appeal arose from a "finite reinsurance" transaction between American International Group, Inc. (AIG) and General Reinsurance Corporation (Gen Re). Defendants, four executives of Gen Re and one of AIG, appealed from judgments convicting them of conspiracy, mail fraud, securities fraud, and making false statements to the Securities and Exchange Commission. Defendants appealed on a variety of grounds, some in common and others specific to each defendant, ranging from evidentiary challenges to serious allegations of widespread prosecutorial misconduct. Most of the arguments were without merit, but defendants' convictions must be vacated because the district court abused its discretion by admitting the stock-price data and issued a jury instruction that directed the verdict on causation. View "United States v. Ferguson, et al." on Justia Law

Plaintiffs claimed that defendants, owners and managers of a for-profit website called DMV.org, violated federal and state unfair competition and false advertising laws by actively fostering the belief that DMV.org was an official state DMV website, or was affiliated or endorsed by a state DMV. The district court held that defendants violated section 43(a) of the Lanham Act, 15 U.S.C. 1125(a), but rejected plaintiffs' claim under California's unfair competition statute. The district court issued an injunction ordering DMV.org to present every site visitor with a splash screen bearing a disclaimer and denied monetary relief and an award of attorney's fees to plaintiffs. Both sides appealed. The court held that plaintiffs had established sufficient injury for Article III standing and that plaintiffs had met both prongs of the test in Jack Russell Terrier Network of Northern California v. American Kennel Club, Inc. for Lanham Act standing. The court held that the district court committed no error in holding that defendants violated the Lanham Act but remanded for the district court to reconsider the duration of the splash screen in light of any intervening changes in the website's content and marketing practices, as well as the dissipation of the deception resulting from past practices. The court held that the district court did not err in denying damages. The court held that because the district court erred in finding that defendants'c conduct was not exceptional and that plaintiffs had unclean hands, its denial of attorney's fees was an abuse of discretion. Therefore, the court remanded for the district court to consider the award of attorney's fees anew. The court held that the district court's findings that defendants were jointly and severally liable were not clearly erroneous. The court held that the district court did not abuse its discretion by refusing to hold DMV.org in contempt for technical breaches of the injunction. Accordingly, the court affirmed in part and reversed in part, remanding with instructions. View "TrafficSchool.com, Inc., et al. v. Edriver Inc., et al." 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

This case arose when the SEC brought suit against Stanford Group Company (SGC), along with various other Stanford entities, including Stanford International Bank (SIB), for allegedly perpetrating a massive Ponzi scheme. In this interlocutory appeal, defendants appealed the preliminary injunction that the receiver subsequently obtained against numerous former financial advisors and employees of SGC, freezing the accounts of those individuals pending the outcome of trial. The court held that the district court had the power to decide the motion for preliminary injunction before deciding the motion to compel arbitration; the district court did not abuse its discretion in granting a preliminary injunction; the preliminary injunction was not overbroad; and the district court acted within its power to grant a Texas Uniform Fraudulent Transfer Act (TUFTA), Tex. Bus. & Com. Code Ann. 24.005(a)(1), injunction rather than an attachment; and that the court did not have jurisdiction to rule on the motion to compel arbitration. Accordingly, the court affirmed and remanded the motion to compel arbitration for a ruling in the first instance. View "Janvey v. Alguire, et al." on Justia Law

Petitioners, each of which had corporate members that issued publicly traded securities, petitioned for review of Exchange Act Rule 14a-11. At issue was whether the Securities and Exchange Commission promulgated the rule in violation of the Administrative Procedure Act, 5 U.S.C. 551 et seq., because, among other things, the Commission failed adequately to consider the rule's effect upon efficiency, competition, and capital formation, as required by Section 3(f) of the Exchange Act and Section 2(c) of the Investment Company Act and Section 2(c) of the Investment Company Act of 1940, 15 U.S.C. 78c(f) and 80a-2(c). The court held that the Commission acted arbitrarily and capriciously for having failed once again to adequately assess the economic effects of a new rule. The court also held that the Commission inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial problems raised by commenters. Therefore, the Commission's decision to apply the rule to investment companies was also arbitrary. Because the court concluded that the Commission failed to justify Rule 14a-11, the court need not address petitioners' additional argument that the Commission arbitrarily rejected proposed alternatives that would have allowed shareholders of each company to decide for that company whether to adopt a mechanism for shareholders' nominees to get access to proxy materials. Accordingly, the petition was granted and the rule was vacated. View "Business Roundtable, et al. v. SEC" on Justia Law