Corporation & Enterprise Law Case Summaries
[10/10] Morrical v. Rogers [10/09] US v. Peters [09/17] Charter Township of Clinton Police and Fire Retirement System v. Martin [09/10] In re: Wilshire Courtyard [09/09] AmBase Corp. v. US [09/05] Roman Catholic Bishop v. Bowen [08/30] Cunningham v. Magidow [08/21] Ortiz-Bonilla v. Federacion de Ajedrez de Puerto Rico [07/31] Dennis v. Hart [07/30] US v. Trek Leather, Inc. [07/24] Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund [07/11] Toho-Towa Co. v. Morgan Creek Productions, Inc. [07/01] SFPP v. Public Utilities Commission [06/27] DeLuca v. State Fish Co., Inc. [06/26] Barenboim v. Starbucks Corporation [06/19] Havasu Lakeshore Investments, LLC v. Fleming [06/18] SB Liberty, LLC v. Isla Verde Association, Inc. [06/18] Castillo Grand, LLC v. Sheraton Operating Corporation [05/30] Schlessinger v. Valspar Corporation [05/30] Bush v. US
Judgment dismissing plaintiff’s shareholder derivative action against officers and directors of Yahoo! Inc., is affirmed, where plaintiff failed to plead particularized facts manifesting a reasonable doubt that the board could not have exercised its independent and disinterested judgment in responding to his demand, had he made one at the time he brought the action.
The trial court’s order setting aside the election of new directors and invalidating several of the underlying corporate transactions, in a suit brought by plaintiff sister challenging actions taken by her brothers with respect to a group of family corporations in which all three are co-equal shareholders, is reversed and remanded, where: 1) Corporations Code section 709 permits a corporate electoral challenge on the grounds of an alleged breach of fiduciary duty, which governs corporate transactions with companies in which one or more corporate directors have a material financial interest; but 2) the trial court erred in failing to require that the brothers be joined in this action as indispensable parties.
Following defendant’s convictions related to a scheme to defraud a bank, the district court’s order of forfeiture is affirmed, where: 1) 18 U.S.C. section 982(a)(2) requires forfeiture of the gross receipts of the criminal violation, not only the profits; and 2) in light of his almost total control over the companies involved in the violation and their assets, the defendant “indirectly” obtained the proceeds of the fraud through the companies and can therefore be held accountable for criminal forfeiture of those proceeds pursuant to section 982.
Dismissal of plaintiffs’ shareholder derivative complaint alleging that the defendant-Board members violated fiduciary duties by adopting a compensation plan in the face of poor performance by the company, misrepresenting compliance with the plan and company performance in a proxy statement, and failure to alter the plan in response to its rejection by a majority of the company’s shareholders in a nonbinding vote, is affirmed, where plaintiffs have failed to allege facts excusing pre-suit demand on the defendant-Board with allegations of particularized facts showing wrongdoing by a majority of directors on a director-by-director basis.
The bankruptcy court had jurisdiction to reopen a bankruptcy proceeding to consider the tax consequences of the reorganization of the debtor-partnership, where: 1) as part of the bankruptcy, the partnership was reorganized into a limited liability company with a 1% ownership interest in two commercial buildings, over $200 million of partnership debt was forgiven, and the individual partners reported cancellation of debt income on their tax returns; 2) the California Franchise Tax Board sought to assess $13 million in unpaid income taxes on the individual partners, characterizing the transaction as a disguised sale and the reported cancellation of debt income as capital gains; and 3) under the “close nexus” test, post-confirmation jurisdiction in this case extends to matters such as tax consequences that likely would have affected the implementation and execution of the plan if the matter had arisen contemporaneously.
The district court’s order granting in part and denying in part plaintiff’s claim for a refund for the 1989 tax year is: 1) affirmed in part, where the district court had subject-matter jurisdiction and as to plaintiff’s claimed deduction to the extent that it offsets its affiliate’s post-seizure income for the 1992 tax year; but 2) vacated in part and remanded, where the district court should grant plaintiff’s claimed deduction to the extent that it derives from its affiliate’s post-seizure bad debts for the 1992 tax year.
Judgment denying plaintiffs’ petition for writ of mandate seeking to compel defendant Secretary to file articles of incorporation is affirmed, where: 1) the Secretary has a ministerial duty to file submitted articles of incorporation if they conform to law; 2) the Secretary acted well within her ministerial authority in refusing to file the articles of incorporation for “Pastor of Santee Catholic Mission, a corporation sole,” because the dissolution provision contained therein does not conform to and is in direct conflict with Corporations Code section 10015 in that it fails to direct that any remaining assets be distributed to the Santee Catholic Mission Parish, �the religious organization governed by the corporation sole; and 3) to the extent plaintiffs challenge other modifications requested by the Secretary, plaintiffs have failed to show that any of those changes resulted in a miscarriage of justice or that plaintiffs were prejudiced thereby.
Following judgment on behalf of plaintiff-shareholder in a shareholder derivative action on behalf of Royal Airline Linen, Inc. against defendant officer, the trial court’s order compelling plaintiff to acknowledge that the judgment had been partially satisfied in the amount of $452,000, which was the amount that defendant officer forgave of loan that he had made to Royal, is reversed, where: 1) the appeal is not moot; and 2) the trial court abused its discretion in making the order because no equitable consideration weighs in favor of granting the partial satisfaction of the judgment.
In a dispute between plaintiff chess players and defendant, the Puerto Rico Chess Federation, alleging violations of their constitutional rights and state law, summary judgment for defendant is: 1) affirmed in part, where the district court had subject matter jurisdiction over plaintiffs’ first request for injunction, and thus could exercise supplemental jurisdiction over the Puerto Rico law claims arising from the “same nucleus of operative facts,” and 2) reversed in part and remanded, where the district court erroneously concluded it had jurisdiction over the second case which did not assert claims “premised on the United States Constitution,” and showed success on the merits for three of their appealed claims.
In shareholder derivative suits alleging that a corporation’s executive compensation policies violated state law, the district court’s orders dismissing portions of each case and remanding the remaining portions for lack of jurisdiction are vacated and remanded, where: 1) none of defendants’ arguments in favor of federal jurisdiction are persuasive; and 2) removal of these cases was improper and the district court lacked jurisdiction to do anything other than remand them to state court.
The decision of the Court of International Trade finding defendant-corporate officer liable for gross negligence in connection with the entry of imported merchandise into the U.S., is reversed and remanded, where defendant-corporate officer cannot be personally chargeable with negligence for the actions he took in his capacity as a corporate officer and on behalf of defendant-corporation because the government failed to: 1) pierce the corporate veil to establish that defendant-corporate officer was the actual importer of record; and 2) show that the defendant-corporate officer is liable for fraud under 19 U.S.C. section 1592(a)(1)(A) or as an aider and abettor of fraud by defendant-company under section 1592(a)(1)(B).
In a dispute involving withdrawal liability for the pro rata share of unfunded vested benefits to a multiemployer pension fund of a bankrupt company, summary judgment for plaintiff-private equity funds is: 1) reversed in part and remanded, where the district court erred in ending the potential claims against the plaintiff-private equity funds by entering summary judgment for them under the “trades or businesses” aspect of the two-part “control group” test under 29 U.S.C. section 1301(b)(1), and the “trade or business” requirement has been satisfied as to Sun Fund IV; 2) vacated in part and remanded for further factual development as to plaintiff Sun Fund III under the control group test; and 3) affirmed in part, where the district court was correct to enter summary judgment in favor of the plaintiff-private equity funds on defendant-pension fund’s claim of liability on the ground that the funds had engaged in a transaction to evade or avoid withdrawal liability.
The trial court’s order adding defendant as a judgment debtor to a judgment for more than $5.7 million which plaintiff was awarded against two of defendant’s affiliated companies, is affirmed, where: 1) substantial evidence supports the trial court’s ruling that the three business entities constituted a single business enterprise for purposes of imposing alter ego liability on defendant for the debts of the other two companies; and 2) the trial court did not abuse its discretion in declining to set aside said ruling.
A petition for a writ of review of two of the Public Utilities Commission’s (PUC) rate-setting orders, brought by petitioner, who operates intrastate and interstate oil pipelines, is denied, where: 1) the PUC’s decision regarding the treatment of partnerships for tax purposes is a policy question, and thus, not subject to reversal by this court; and 2) the PUC did not abuse its discretion in its calculation of an appropriate return on equity.
The trial court erred in granting defendant’s motion to disqualify plaintiff’s counsel, where: 1) plaintiff advised that he would using, as an expert witness, an expert who had testified on behalf of the defendant in a prior trial; and 2) although defendant claimed plaintiff’s counsel had obtained access to the confidential information possessed by the expert, defendant failed in its burden to establish the expert possessed confidential information materially relevant to the pending proceedings.
In response to certified questions from The United States Court of Appeals for the Second Circuit regarding defendant’s tip-splitting policy under N.Y. Labor Law section 196-d: 1) an employee whose personal service to patrons is a principal or regular part of his or her duties may participate in an employer-mandated tip allocation arrangement under Labor Law section 196-d, even if that employee possesses limited supervisory responsibilities, but an employee granted meaningful authority or control over subordinates can no longer be considered similar to waiters and busboys within the meaning of section 196-d and, consequently, is not eligible to participate in a tip pool; and 2) defendant’s decision to exclude assistant store managers from the tip pool is not contrary to Labor Law section 196-d.
The trial court’s order disqualifying a law firm from simultaneously representing a limited liability company, its managing member (a partnership), and the non-member person who managed that partnership in a breach of contract lawsuit against two of the company’s minority members, is reversed, where because no actual conflict of interest existed between the company and the individual who managed the company’s managing member, there was no reasonable likelihood such a conflict would arise.
The trial court’s denial of plaintiff’s motion for a preliminary injunction seeking to enjoin defendant-homeowners association and its Board from taking any action to prevent or interfere with plaintiff’s representatives, including its attorney, attending and participating in the Board’s meetings, is affirmed, where the trial did not err in concluding that: 1) the Board may exclude from the open sessions of its meetings a person like plaintiff’s attorney who is not a member of the defendant-association; and 2) plaintiff failed to meet its burden of showing a reasonable probability of prevailing on the merits at trial.
The district court’s order awarding defendant $200,000 in attorney’s fees and $30,000 in costs, is vacated and remanded with directions to delete the award of attorney’s fees, where: 1) 28 U.S.C. section 1919 does not authorize an award of attorney’s fees; and 2) although such fees may be awarded on a non-statutory basis for bad faith in the conduct of litigation, fees were not warranted under the circumstances of this case, where plaintiff re-filed a lawsuit after non-diverse members of a limited liability corporation were dropped in an attempt to invoke diversity of citizenship jurisdiction.
In response to the certified questions: 1) General Business Law section 395-a, which (with certain exceptions) forbids the termination before expiration of any “maintenance agreement covering parts and/or service,” does not make contract clauses that contradict its terms null and void; and 2) violation of section 395-a alone does not give rise to a cause of action under General Business Law section 349.
Dismissal of plaintiff-taxpayers’ refund suit by the Court of Federal Claim is affirmed, where: 1) under the Tax Equity and Fiscal Responsibility individual partners may not bring tax challenges relating to subject matter attributable to a partnership item, rather, such claims must be brought in a partnership-level suit by the partnership representative or Tax Matters Partner; and 2) plaintiffs’ claim for a refund of taxes and penalties assessed for substantial underpayments of tax attributable to tax motivated transactions of their oil and gas partnership, is an impermissible collateral attack.
[10/10] Morrical v. Rogers
[10/09] US v. Peters
[09/17] Charter Township of Clinton Police and Fire Retirement System v. Martin
[09/10] In re: Wilshire Courtyard
[09/09] AmBase Corp. v. US
[09/05] Roman Catholic Bishop v. Bowen
[08/30] Cunningham v. Magidow
[08/21] Ortiz-Bonilla v. Federacion de Ajedrez de Puerto Rico
[07/31] Dennis v. Hart
[07/30] US v. Trek Leather, Inc.
[07/24] Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund
[07/11] Toho-Towa Co. v. Morgan Creek Productions, Inc.
[07/01] SFPP v. Public Utilities Commission
[06/27] DeLuca v. State Fish Co., Inc.
[06/26] Barenboim v. Starbucks Corporation
[06/19] Havasu Lakeshore Investments, LLC v. Fleming
[06/18] SB Liberty, LLC v. Isla Verde Association, Inc.
[06/18] Castillo Grand, LLC v. Sheraton Operating Corporation
[05/30] Schlessinger v. Valspar Corporation
[05/30] Bush v. US