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Court Crier: Corporate and Securities Law

In Salzberg v. Sciabacucchi, the Supreme Court of Delaware held that provisions in Delaware corporation charters that required actions under the Federal Securities Act of 1933 to be filed in federal court can be valid under Delaware law. In so holding, the court recognized that the federal-forum provisions of the charters fall within the broad enabling text of Delaware General Corporation Law Section 102(b)(1), which allow for provisions for the management of the business, for the conduct of corporate affairs, and for provisions related to the creation or regulation of powers of the corporation, directors, and stockholders. (April 14, 2020)

In Snyder v. Crusader Servicing Corporation, the Superior Court of Pennsylvania held that the trial court should have enforced the valuation procedure set forth in the shareholders’ agreement in awarding damages. In this case, a shareholder brought actions against the directors and corporation arising out of the termination of his relationship with the corporation but only prevailed on his breach-of-contract claim against the corporation based on its failure to buy back his shares. In doing so, the court recognized that the value of a party’s interest in a business entity is governed by the shareholders’ agreement when it contains a valuation method that can be enforced. (March 18, 2020)

In United States of America v. Fishoff, the United States Court of Appeals for the Third Circuit held that a defendant who violates a Security and Exchange Commission (SEC) rule or regulation but proves that he “had no knowledge of such rule or regulation” is not subject to imprisonment under the non-imprisonment defense(January 30, 2020)

In Laurel Gardens, LLC v. McKenna, the United States Court of Appeals for the Third Circuit addressed personal jurisdiction in a Racketeer Influenced and Corrupt Organizations Act (RICO) case. The district court dismissed certain defendants for lack of personal jurisdiction under the traditional personal jurisdiction analysis. The Third Circuit vacated the order, holding that the specific provision of the RICO statute, 18 U.S.C. §1965(b), authorizing nationwide exercise of personal jurisdiction in certain circumstances applied and that the plaintiffs had established such jurisdiction over the defendants. (January 14, 2020)

In McElrath v. Kalanick, the Supreme Court of Delaware addressed whether a derivative action was properly brought in the Court of Chancery where the shareholder failed to first make a demand on the board of directors before pursuing litigation on behalf of the corporation. The court dismissed the derivative action, finding that absent circumstances not applicable there, the board (not the shareholder) controlled the decision of whether to bring suit on the corporation’s behalf. (January 13, 2020)

In O’Connor v. Kadrmas, the Massachusetts Appeals Court addressed whether distributions pursuant to a stock agreement were wages within the meaning of the Wage Act, Mass. Gen. Laws. c. 149. After leaving a close corporation, a shareholder brought suit under the Wage Act claiming that he did not receive his quarterly distribution or amounts that were due him for revenue that he generated. Holding that distributions under the stock agreement are not "wages" within the scope of the Wage Act, the court reasoned that the distributions were not salary, pay, or commissions. Furthermore, the distributions were not compensation from an employer to an employee. (Oct. 18, 2019)

In Sheldon v. Pinto Technology Ventures, L.P., the Supreme Court of Delaware held that venture capital firms that had previously invested together and jointly benefited from an amended stock purchase agreement were not a “control group” which would permit certain minority shareholders to bring a direct action against them for a breach of fiduciary duty. The company at issue underwent several rounds of refinancing which included investment from the venture capital firms. As a result of the 2010 refinancing, the stock purchase agreement was amended and it diluted the minority shareholder’s interest in the company. An eventual purchase of the company extinguished any derivative claim. The court held that the minority shareholders could only show a “mere concurrence of self-interest,” which was not sufficient to allow a direct claim. (October 7, 2019)

In Securities and Exchange Commission v. Gentile, the United States Court of Appeals for the Third Circuit addressed whether properly issued and framed § 78u(d)(1) and (6) injunctions can be penalties subject to the five-year statute of limitations under 28 U.S.C. 2462. The court found that 78u(d) does not permit punitive injunctions, so the injunctions at issue do not fall within the reach of section 2462. (September 26, 2019)

In North Sound Capital v. Merck & Company, Inc., the United States Court of Appeals for the Third Circuit addressed whether the Securities Litigation Uniform Standards Act (SLUSA) prohibited class members who opted out of a federal class action from pursuing cases under state law based on similar allegations. Because the court found no evidence that the opt-out plaintiffs coordinated with the class action or other opt-out suits, their suits did not constitute “single actions” under the SLUSA. Therefore, they can pursue their state-law suits. (September 12, 2019)

In Tiger v. Boast Apparel, Inc., the Supreme Court of Delaware addressed whether a presumption of confidentiality exists for the corporate books and records produced to a stockholder under Section 220 of the Delaware General Corporation Law. No such presumption exists. Rather, the chancery court, when considering confidentiality, should weigh the stockholder’s free communication interests against the corporation’s confidentiality interest(August 7, 2019)

In Fan v. Stonemor Partners LP, the United States Court of Appeals for the Third Circuit addressed whether a financial investor’s claim against a business for false and misleading statements to the investor’s detriment stated a cognizable claim under the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4. The court held that the allegations did not meet the heightened pleading standard under the Act, as the business’ disclosure of information as to the risk inherent in its business rendered the alleged misrepresentations immaterial. (June 20, 2019)

In Marchand v. Barnhill, the Supreme Court of Delaware addressed the viability of a shareholder’s derivative suit charging the company’s board with breach of loyalty. The court found that a board member’s close personal relationship with an interested party is insufficient to create a reasonable doubt as to the board’s impartiality. The court also addressed the pleading requirements of a Caremark claim. The court held that a shareholder must, at the least, plead facts from which a reasonable inference can be made that the company’s board made no effort to put in place a board-level compliance system. (June 18, 2019)

In Ratner v. Iron Stone Real Estate Fund I, L.P., the Superior Court of Pennsylvania addressed whether the duration of a limited partnership agreement can be extended after the partnership had expired. The court found that the limited partners could seek to dissolve the partnership by filing a direct action under the Pennsylvania Uniform Limited Partnership Act (Act) and did not need to file a derivative action. The court also found that the Act does not provide for rescission of dissolution of a limited partnership, and the Official Comment to Section 8681 of the Act suggesting the contrary has no application. (May 29, 2019)

In Givelify, LLC v. Department of Banking and Securities, the Commonwealth Court of Pennsylvania addressed whether a company soliciting donations for non-profit organizations through an online software application was engaged in the business of “transmitting money” without a license, a violation of former Section 2 of the Pennsylvania Money Transmitter Act (MTA). The court held that where a company transmitted information vital to donative transactions, but did not transmit the money itself, it is not engaged in the business of transmitting money. The court noted that Section 2 of the MTA underwent substantial changes when Act 129 of 2016 was enacted into law, and refused to express a view as to whether these activities would run afoul of the present version of the MTA. (May 30, 2019)

In Linde v. Linde, the Superior Court of Pennsylvania addressed whether a trust, controlled by one individual, could exercise its purchase rights under a stock purchase agreement when a separate settlement agreement was in direct conflict of that right. The court held that pursuant to the doctrine of necessary implication, a term prohibiting such a purchase should be implied because otherwise the parties’ rights under the settlement agreement would be destroyed. (May 21, 2019)

In In Re: NFL Players Concussion v. White, the United States Court of Appeals for the Third Circuit addressed cash advance arrangements entered into by certain members of the class action with third party litigation funders, assigning their rights to a portion of their settlement proceeds in exchange for receipt of immediate cash. The final settlement agreement of the class action included an anti-assignment provision which forbade the members of the class action from assigning “rights or claims relating to the subject matter of the Class Action Complaint.” The court concluded that any assignments within the cash advance agreements which allowed the lender to step into the shoes of the player and pursue a claim were void. However, any cash advance agreements that were simply loans or less than a true assignment of rights were not necessarily void. (April 26, 2019)

In Olenik v. Lodzinski, et al, the Supreme Court of Delaware addressed whether the business judgment rule, as opposed to the entire fairness standard of review, should apply in a sale where the proxy statement disclosed all material facts and the purchaser conditioned its offer on the approval of a special committee and the vote of a majority of the minority shareholders. The court found the business judgement rule, outlined in Kahn v. M&F Worldwide Corp., may apply to the transaction as the plaintiff’s complaint supported a reasonable inference that substantial negotiations took place prior to the implementation of procedural safeguards, which would have negated the need for the business judgment standard. The court held further that the business judgment rule may still be applied, despite the presence of a special committee and the requirement of a minority shareholder vote, if the purchasers engage in legitimate negotiations prior to the creation of the special committee or if there is doubt regarding the special committee’s power to prevent the ultimate sale. (April 5, 2019)

In Lorenzo v. Securities and Exchange Commission, the Supreme Court of the United States considered whether an investment banker could be liable for participating in a fraud scheme and for engaging in deceptive acts when he passed along untrue statements authored by someone else. The Court held that even though the investment banker could not be held liable for making false statements, he can be liable for participating in a fraud scheme and for engaging in deceptive acts. (March 27, 2019)

In KT4 Partners LLC v. Palantir Technologies Inc., the Supreme Court of Delaware addressed whether the Court of Chancery abused its discretion in denying the stockholder’s requests to inspect a private company’s emails relating to amendments to the shareholders agreement pursuant to its section 220 demand to inspect the company’s books and whether the Court of Chancery abused its discretion in imposing a Jurisdictional Use Restriction and limiting the stockholder from bringing its suit in Delaware Superior Court. Ultimately, the Supreme Court held that the Court of Chancery abused its discretion in both instances, stating that emails were properly discoverable under Delaware’s section 220 when they relate to the operation of the company and rights of shareholders and that the threat of forum shopping was outweighed by the lack of contextual and statutory support for permitting a company to condition its production of documents to a shareholder on a requirement that the shareholder file any resulting suit in the Court of Chancery. (January 29, 2019)

In Pittsburgh History and Landmarks Foundation v. Ziegler, the Pennsylvania Supreme Court considered how the attorney-client privilege applies in a corporate shareholder/member derivative suit where both the derivative plaintiffs and management defendants claim to be acting on behalf of the corporation. The court declined to adopt a less rigorous good cause analysis as an exception to the privilege because doing so would create less certainty with respect to the privilege. (January 23, 2019)

In Jaroslawicz v. M&T Bank Corporation, a securities class action, the Third Circuit analyzed for the first time the scope of mandated disclosure under Item 503(c) of Regulation S-K, which requires disclosure of significant risks in a securities offering. The court rejected a duty to disclose all material facts or corporate wrongdoing unless non-disclosure of misconduct “makes other voluntary statements misleading,” but held that adequate disclosures under Item 503(c) must be “company specific.” The court held further that the disclosures may not be “generic,” such that they could apply “across an industry.” Required Item 503(c) disclosures in a pre-merger proxy statement included a “high volume” of past but not ongoing consumer regulatory violations because they plausibly could have delayed regulatory merger approval. Finally, even adequately specific supplemental disclosure six days before a shareholder vote on the merger raised an issue of fact as to whether such disclosure is adequate as a matter of law. (December 26, 2018)

In Sky-Track Technology Company Limited v. HSS Development, Inc., the New York Supreme Court, Appellate Division, 2d Department, decided whether to pierce the corporate veil in a breach of contract action against a corporation’s owner. The court dismissed the complaint against the individual owner, finding only conclusory allegations that the individual and the corporation, doing business under different names, acted as each other’s alter egos. The court concluded that, “inasmuch as the plaintiff offered nothing more than bald, unsubstantiated allegations that there was an abuse of the privilege of doing business in the corporate form . . . alter ego liability could not be imposed” on the individual. (December 19, 2018)

In Jacobs v. Federal Housing Finance Agency, the United States Court of Appeals for the Third Circuit considered whether The Housing and Economic Recovery Act’s (The Recovery Act) limitations on judicial review (12 U.S.C. § 4617(f)) barred a company’s shareholders from seeking injunctive or equitable relief against a federal agency empowered to act as a conservator for the company. The court held that because the shareholder’s requested relief would restrain or affect the exercise of the agency’s powers as a conservator, it was barred by The Recovery Act. (November 14, 2018)

In Flood v. Synutra International, Inc., the Supreme Court of Delaware addressed whether the business judgement rule applies to a merger proposed by a controlling stockholder even if the controlling shareholder failed to commit to certain requisite safeguards in its initial offer. Delaware law holds that the business judgment review applied to a merger proposed by a controlling stockholder conditioned before the start of negotiations on “both the approval of an independent, adequately empowered Special Committee that fulfills its duty of care; and the uncoerced, informed vote of a majority of the minority stockholders.” In this case, the controlling stockholder's initial offer did not contain the required conditions, but his two-week, follow-up letter incorporated the required conditions. The court declined to apply a bright line rule to the ab initio requirement. Instead, the court held the two-week, follow-up letter met the ab initio requirement because it was early in the process, before the start of any substantive economic negotiations. (October 9, 2018)

In Taksir v. The Vanguard Group, the United States Court of Appeals for the Third Circuit addressed whether the Securities Litigation Uniform Standards Act of 1998 (SLUSA) barred a class action brought by investors under state law against their broker for allegedly overcharging them for the execution of certain securities transactions. The court held that the SLUSA did not bar the claims because the overcharges were not materially connected to the securities transactions. (September 5, 2018)

In Morrison v. Berry, the Supreme Court of Delaware addressed the business judgment rule, which serves as the standard of review of a merger that has been approved by a fully informed, uncoerced majority of disinterested stockholders. The court found that the business judgment rule was not properly invoked because the complaint at issue alleged that there was a failure to disclose facts that would have been material to a voting stockholder. (July 9, 2018)

In Clientron Corporation v. Devon IT, Inc. the United States Court of Appeals for the Third Circuit addressed whether it was proper to pierce the corporate veil and impose a discovery sanction on only one spouse when the corporation was owed entirely as a tenancy by the entirety by the spouses. The court held that such a sanction was not appropriate, because the tenancy by the entirety creates the legal fiction that the husband and wife are one indivisible person, and therefore if the corporate veil was to be pierced the sanction must be imposed on both spouses. (July 5, 2018)

In R.A. Feuer v. Merck & Company, Inc., the Superior Court of New Jersey, Appellate Division, addressed the scope of a shareholder’s right to inspect a corporation’s records under N.J.S.A. 14A:5-28(4), which preserves a court’s power to grant inspection to shareholders, upon proof of a “proper purpose” of the corporation’s “books and records of account, [and] minutes and records of shareholders of a corporation.” The court held that the shareholder’s demands for the corporation’s “books and records,” which pertained to its investigation and denial of his demand that the corporation commence suit against itself, exceeded the scope of inspection the court granted him under N.J.S.A. 14A:5-28(4). In holding so, the court held that the term “minutes” refers to shareholder, board and executive committee minutes referenced in subsection N.J.S.A. 14A:5-28(1), and the phrase “books and records of account” consists of accounting or financial documents; it does not encompass any and all records, books and documents of a corporation, and does not necessarily encompass all financial documents of a corporation. (June 1, 2018)

In Seaport Global Securities LLC v. SB Group Holdco, LLC, the Supreme Court of New York, Appellate Division, 1st Department, considered whether the denial of the defendant’s motion to dismiss the amended complaint and for a stay of discovery pending the motion should be affirmed.  The plaintiff alleged that the defendant breached a contract for the sale of stock. Specifically, the plaintiff alleges that the defendant refused to transfer the stock and failed to make commercially reasonable efforts to settle the trade and that these breaches prevented the plaintiff from selling the stock to a third party. The court affirmed the lower court’s denial of the defendant’s motion to dismiss the amended complaint and for the stay of discovery pending the motion because the complaint adequately pled specific performance, which is applicable to stock that is thinly traded or privately held and adequately pled monetary damages. (June 7, 2018)

In Allison v. Eriksson, the Supreme Judicial Court of Massachusetts addressed the available remedies for LLC mergers that are conducted in violation of a member’s fiduciary duties. Holding that such a merger does not qualify as a merger under M.G.L. c. 156, § 63, the court found that the transaction is not covered by the exclusive remedy provision under § 60 (b) for a statutory right of distribution. Rather, the court found that equitable remedies are available to members when an LLC merger constitutes a breach of fiduciary and contractual duties. (May 30, 2018)

In A Pocono Country Place Property Owners Association v. Kowalski, the Commonwealth Court of Pennsylvania held that a director’s personal behavior toward other members of the board of directors was insufficient grounds for judicial removal under the Nonprofit Corporation Law of 1988. The court distinguished between proper cause for board action and proper cause required for the court to remove a director, holding that, absent proof of illegal conduct, fraud, dishonesty, or extreme mismanagement, it is up to the board, not the court, to determine whether removal was necessary. (May 7, 2018)

In Cyan, Inc. v. Beaver County Employees Retirement Fund, the United States Supreme Court addressed the issue of whether the Securities Litigation Uniform Standards Act of 1998 (SLUSA) deprived state courts of jurisdiction over “covered class actions” asserting only claims under the Securities Act of 1933. The court held that SLUSA did nothing to strip state courts of their longstanding jurisdiction to adjudicate class actions brought under the Securities Act of 1933. (March 20, 2018)

In Kahn v. Stern, the Supreme Court of Delaware addressed the pleading standard for a review of claims against independent board directors for breach of the duty of loyalty in connection with a merger. The court found that the pleaded facts did not support a rational inference that the directors improperly diverted merger consideration into payments for two management directors. However, the court further noted that the trial court should not invariably require that the plaintiff plead facts that a majority of the board committed a non-exculpated breach of its fiduciary duties after the sale of the company. Further, the plaintiff need not plead facts that rule out any possibility other than bad faith, rather than just pleading facts that support a rational inference of bad faith. (March 15, 2018)

In Appel v. Berkman, the Supreme Court of Delaware addressed whether stockholders were adequately informed of the details of a merger before accepting a tender offer where they were not advised why the chairman of the company abstained from supporting the merger and approving the deal. The court found that the failure to provide the reasons for a dissenting or abstaining board member’s vote can be materially misleading under Delaware law which gives effect to an informed stockholder decision(February 20, 2018)

In Digital Realty Trust, Inc. v. Somers, the United States Supreme Court addressed whether an employee who reported suspected securities-law violations to senior management of his company was protected from retaliation under the Dodd-Frank Act. The court held the employee was not protected because he did not report the suspected violations to the Securities and Exchange Commission prior to his termination. (February 21, 2018)

In Braun v. Herbert, the Superior Court of Pennsylvania addressed whether a corporation’s decision to reject a shareholder’s demand to bring an action for breach of fiduciary duty was protected by the business judgment rule. Because that decision was the result of a recommendation from an independent special litigation committee, the court found that the business judgment rule precluded the shareholder from bringing a derivative action. The court further found that a special litigation committee member’s mere service on the board does not render that member “interested” such that the independent nature of the recommendation could be challenged. (February 22, 2018)

In Deerin v. Ocean Rich Foods, LLC, the New York Supreme Court, Appellate Division, 2d Department, addressed the evidence required by a limited liability company to defeat a claim from a deceased member’s estate seeking distribution upon withdrawal under Limited Liability Company Law § 509. The company claimed that it had offered the member’s estate the fair value of his interest, supported only by an attorney affirmation. The court held that the company failed to demonstrate their prima facie entitlement to judgment as a matter of law because the attorney affirmation alone had “no probative or evidentiary value.” (February 7, 2018)

In City of Birmingham Retirement and Relief System v. Good, the Supreme Court of Delaware considered whether certain directors and officers could dismiss a stockholder derivative suit under Court of Chancery Rule 23.1 for not making a demand on the board of directors before instituting litigation. The stockholders argued that the demand was futile because the board’s mismanagement of the company’s environmental concerns rose to the level of a Caremark violation, which posed a substantial risk of the directors’ personal liability for damages caused by the spill and enforcement action. The Court held that the stockholders did not sufficiently allege that the directors faced a substantial likelihood of personal liability for a Caremark violation, instead, at most they faced the risk of an exculpated breach of the duty of care. Therefore, the court dismissed the stockholders’ derivative suit as the stockholders were required to make a demand on the board to consider the claims before filing suit. (December 15, 2017)

In Kassover v. Prism Venture Partners, LLC, the New York Supreme Court, Appellate Division, 1st Department, addressed whether a selling shareholder violated Business Corporations Law § 501 (c) by giving other shareholders less consideration for their shares in connection with a merger. The court held that the selling shareholder established prima facie that the other shareholders were not entitled to the same compensation as the selling shareholders, because the other shareholders declined to sign a letter agreement or assignment agreement that the selling shareholders signed in exchange for their compensation. (December 21, 2017) 

In In re Estate of Peter J. Caruso, III, Deceased, the Superior Court of Pennsylvania examined whether the Dead Man’s Act could be used to bar a surviving partner in a partnership from setting forth evidence (testimony) to establish that the partnership continued after the deceased partner’s death. The court held that the surviving partner produced other adequate evidence that the partnership continued, such as tax returns and admissions in a prior case, even though she would have been incompetent to testify about pre-death events from a person adverse to the decedent. (December 12, 2017)

In Jacobs v. Cartalemithe Supreme Court of New York, Appellate Division, 2d Department, addressed whether a plaintiff in a derivative action on behalf of an LLC loses standing if he withdraws as a member of the LLC during the pendency of the derivative action. The court held that, “once the plaintiff withdrew from [the LLC], he lost standing to maintain any derivative causes of action on behalf of [the LLC], notwithstanding his possible right to a future payment for the value of his membership interest upon his withdrawal.” (December 6, 2017)

In 1400 North Third Street Enterprises v. The City of Harrisburg License and Tax Appeal Board, the Commonwealth Court of Pennsylvania held that Liquor Code preempted a city's authority to revoke and refusal to renew a business license based on criminal activity at or near the licensee's premises. The Liquor Code grants the Pennsylvania Liquor Control Board the authority to license liquor serving premises which it highly regulates and also provides various methods for handling nuisance establishments. Therefore, the city’s denial of the business license due to criminal activity amounting to a public nuisance was preempted by the Liquor Code. (November 29, 2017)

In Matter of FR Holdings, FLP v. Homapour, the New York Supreme Court, Appellate Division, 2d Department, addressed the court’s power to direct judicial dissolution of a limited liability company. Members of an LLC, who owned 62.5% interest in the LLC, commenced an action seeking dissolution of the LLC, alleging that a member who owned 12.5% interest had unilaterally usurped management and control over the LLC in violation of the operating agreement. The court examined dissolution under Limited Liability Company Law § 702, under which a member seeking judicial dissolution must show that (1) the management of the entity is unable or unwilling to reasonably permit or promote the stated purpose of the entity to be realized or achieved, or (2) continuing the entity is financially unfeasible. The court refused to judicially dissolve the LLC, holding that the majority members failed to establish these factors. (October 25, 2017)

In Koshy v. Sachdev, the Supreme Judicial Court of Massachusetts ruled that a computer aided design services corporation owned by two shareholders, who each owned 50% of the company and served as the only two directors of the company, was deadlocked under the corporate dissolution statute, G. L. c. 156D, § 14.30. The court, interpreting the statute for the first time, found that irreconcilable differences and acrimony between the directors threatened irreparable harm to the company as a going concern, and constituted a “true deadlock.” The court further reasoned that because the court was authorized by statute to enforce the extreme remedy of involuntary dissolution of the company, it was also empowered to force a buyout or public auction of the company. It therefore remanded the case to the trial judge to determine an appropriate remedy. The court further held a shareholder did not breach his fiduciary duties by refusing to consent to tax and dividend distributions, and by making a “low-ball” offer for the other’s shares, because he had a legitimate business purpose in maintaining the capitalization of the company, and his offer to purchase shares was not advanced in bad faith. (September 14, 2017)

In Williams v. Globus Medical, Inc., the United States Court of Appeals for the Third Circuit examined whether a publicly traded company and its executives violated the Securities Exchange Act and defrauded investors by failing to disclose the company’s decision to terminate one of its distributor contracts and by issuing revenue projections that failed to account for this decision. The court determined that the company had no duty to disclose its decision to terminate its relationship with one of its distributors. The court further held that the company’s revenue projections were neither false nor misleading when made. (August 23, 2017)

In Corban v. Sarepta Therapeutics, Inc., the United States Court of Appeals for the First Circuit addressed whether a company had intentionally or recklessly deceived investors, as the company’s stock dropped when the FDA rejected its application for approval of a novel gene therapy. The court held that the shareholders did not allege sufficient facts to create a strong inference that the company deceived the investing public. (August 22, 2017)

In California Public Employees’ Retirement System v. ANZ Securities, Inc., the United States Supreme Court considered whether a public pension funds untimely filing of an individual complaint under Section 11 of the Securities Act of 1933 is grounds for dismissal despite the prior class action filing of which the public pension was a putative class member. The Court determined that the untimely filing of the individual complaint was grounds for dismissal. Section 13 of the Securities Act is a statute of repose which is not subject to tolling on equitable grounds. (June 26, 2017)

In Tillage Commodities Fund, L.P. v. SS&C Technologies, Inc., the New York Supreme Court, Appellate Division, 1st Department, addressed whether a fund administrator breached a service agreement and the implied covenant of good faith and fair dealing with an investment fund when the fund administrator processed a series of wire transfer requests that were later discovered to be fraudulent. The court sustained the breach of contract claim with respect to the fund administrator’s unauthorized disbursement of funds because the investment fund sufficiently alleged that the fund administrator’s conduct “evinced a reckless disregard” for the investment fund’s rights insofar as the fund administrator failed to comply with basic cybersecurity precautions and actively disregarded its own policies as well as obvious “red flags.” (June 22, 2017)

In Norman v. Elkin, the United States Court of Appeals for the Third Circuit addressed the effect of an action to inspect books and records under Delaware law on the statute of limitations for related actions. The court held that an action to inspect books and records may toll the statute of limitations even when the plaintiff has inquiry notice of claims prior to initiating the books and records action. (June 13, 2017)

In Kokesh v. Securities and Exchange Commission, the United States Supreme Court addressed whether the five-year statute of limitations under 28 U.S.C. § 2462 applies to the SEC’s request for disgorgement from a party that violated federal securities laws. The Court held that disgorgement qualifies as a civil penalty under the statute because it is imposed as a consequence for violating public laws as well as punitive purposes. (June 5, 2017)

In Mark Hershey Farms, Inc. v. Robinson, the Superior Court of Pennsylvania addressed whether an executor who exercises control of business entities solely in his capacity as executor of an estate can be held personally liable for breach of contract under a theory of piercing the corporate veil. The court refused to pierce the corporate veil because only shareholders of a corporation may be assessed liability for the acts of a corporation. (May 25, 2017)

In Brennan v. Zafgen, Inc., the United States Court of Appeals for the First Circuit addressed the application of the scienter requirement of the Private Securities Litigation Reform Act. Here, investors sought to pursue a securities fraud class action against a biopharmaceutical developer and its Chief Executive Office for failing to disclose all adverse events suffered by participants in a clinical trial. The court concluded that the investors did not adequately allege that at the time of disclosure, the biopharmaceutical developer or its executives knew or were reckless by not knowing that their failure to provide additional information regarding adverse events was misleading. (April 7, 2017)

In Chitwood v. Vertex Pharmaceuticals, Inc., the Supreme Judicial Court of Massachusetts found that a corporate shareholder had a right under G.L. c. 156D to inspect and copy various categories of corporate records because he had shown his demand was in good faith and for proper purpose, and those records were “directly connected with that purpose.” The shareholder was investigating allegations of a breach of fiduciary duty of oversight with regard to the company’s financial reporting and insider stock sales after company insiders had sold shares shortly before the company announced a lack of new medical research breakthroughs. (March 20, 2017)

In Capone v. Castleton Commodities International LLC, the Supreme Court of New York, Appellate Division, 1st Department, addressed the validity of an exculpatory provision in a corporate unemployment agreement. Noting that the Delaware Limited Liability Company Act was designed to “give the maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements” (6 Del C § 18-1101[b]), the court rejected the former employees’ argument that the exculpatory provision is against public policy. (March 16, 2017)

In In Application by Nonprofit Corporate Trustees, the Commonwealth Court of Pennsylvania held that under a university’s bylaws, trustees were entitled to indemnification for their attorneys’ fees and costs associated with a motion to compel access to the university’s corporate records. The court noted that since Pennsylvania law authorizes a corporate director to inspect and copy “corporate books, records and documents, and in addition to inspect, and receive information regarding the assets, liabilities and operations of the corporation and any subsidiaries of the corporation” under 15 Pa. C.S. §5512(a)(1), when the university denied the trustees access to such information, their only recourse was to file a motion to compel under Section 5512(b) of the Nonprofit Corporation Law. Since they prevailed in the proceeding, they were entitled to indemnification under the university’s bylaws. (March 13, 2017)

In Natixis Real Estate Capital Trust 2007-HE2 v. Natixis Real Estate Holdings, LLC, the New York Supreme Court, Appellate Division, 1st Department, addressed a number of issues that regularly recur in residential mortgage back securities (RMBS) putback actions, including whether or not Natixis Real Estate Capital Trust failed to comply with a condition precedent to commencement of the action and adequately pleaded a cause of action for breach of representations and warranties, and whether a RMBS trustee Securities Administrator has standing to commence an action. The court found the allegations sufficient to plead that Natixis Real Estate Holdings' repurchase and backstop repurchase obligations were triggered by the defendant’s discovery of its own breaches of the representations and warranties with regard to the mortgage loans, and that the Securities Administrator had standing. (March 9, 2017)

In Shawe and Shawe v. Elting, the Supreme Court of Delaware considered whether the Court of Chancery could appoint a custodian and force a sale of a deadlocked Delaware corporation. The company at the center of the dispute had 100 shares of outstanding common stock, with 50 shares owned by each of the parties. The court held that when there is a finding of irreparable harm and intermediate measures were attempted but unsuccessful, under 8 Del. C. § 226, the court may order the appointment of a custodian to sell the company. (February 13, 2017)

In In re Horizon Healthcare Services Inc. Data Breach Litigation, the United States Court of Appeals for the Third Circuit addressed whether insurance company customers suffered injuries sufficient to maintain Article III standing to sue the company when two laptops containing the customers’ personal information were stolen from the company by a third party. The court held that, in light of the congressional decision to create a remedy for the unauthorized transfer of personal information even without evidence of use of the information to the plaintiffs’ detriment, a violation of the Fair Credit Reporting Act, 15 U.S.C. §1681, et seq., gives rise to an injury sufficient for Article III standing purposes. (January 20, 2017)

In Prospect Funding Holdings L.L.C. v. Maslowski, the New York Supreme Court, Appellate Division, 1st Department, addressed whether a lawsuit filed in New York should be dismissed pursuant to CPLR 327(a) in favor of a subsequent lawsuit filed in Minnesota, where the plaintiff, a limited liability company set up under the laws of New York but with its principal place of business in Minnesota, entered into a litigation financing agreement with a Minnesota resident who sustained injuries in a car accident in Minnesota, but the litigation financing agreement included a clause designating New York as the forum for disputes arising out of the agreement. The court held that the parties’ dispute should be heard in Minnesota “in the interest of substantial justice” because: (1) the Minnesota resident demonstrated that the choice of forum provision in the parties’ agreement was unreasonable and should not be enforced; and (2) every aspect of the transaction at issue occurred in Minnesota, including the parties, documents, and witnesses, and defending the action in New York would be a substantial hardship to the Minnesota resident. (January 12, 2017)

In Edmond Ganem v. Invivo Therapeutics Holdings Corporation, the United States Court of Appeals for the First Circuit held that a putative class of investors failed to allege false or misleading statements sufficient to state a claim under Section 10 (b) of the Securities Exchange Act of 1934 and the Securities and Exchange Commission’s Rule 10b-5 where they claimed that a medical device company and its chief executive officer inflated the stock by issuing press releases announcing the approval of human clinical trials without identifying caveats and conditions imposed by the Food and Drug Administration on those trials. (January 9, 2017)

In Trustees of The Upstate New York Engineers Pension Fund v. Ivy Asset Management, the United States Court of Appeals for the Second Circuit addressed whether the “prudent alternative investment theory” was sufficient basis for a complaint alleging breach of fiduciary duty in failing to advise the trustees in 1998 that it had become imprudent to continue as a customer of Bernard L. Madoff Investment Securities LLC. The trustees contended that if they had been so warned, they would have withdrawn the full sum appearing on its 1998 BLMIS account statements and that prudent alternative investment of that sum would have earned more than the fund’s actual net withdrawals from its BLMIS account between 1999 and 2008. The court affirmed the district court’s holding that the trustees had failed to state a claim and failed to allege an actual injury, on the basis that the pension fund earned less than expected but did not suffer any actual loss, and that it is implausible that any non-fraudulent alternative investments would have realized higher returns during the relevant period since reported earnings at the time were artificially inflated and fraudulently gained. (December 8, 2016)

In Mariner Chestnut Partners, L.P., v. Lenfest, the Superior Court of Pennsylvania considered whether the statute of limitations was tolled where the general partner of a limited partnership attempted to conceal its usurpation of a business opportunity prior to the dissolution of the partnership. The court held that the statute of limitations was not tolled pending the outcome of the liquidating trustee’s report regarding potential causes of action against the general partner. The court reasoned that, had they exercised reasonable diligence, the plaintiffs could have discovered the same facts that were later exposed by the liquidating trustee’s report and formed the basis of the plaintiffs’ claims. (December 7, 2016)

In Brestin v. LaBianca, the New York Supreme Court, Appellate Division, 2d Department, addressed whether the present action for breach of a partnership agreement should be dismissed on the ground that there is a pending action raising the same, or substantially similar, claims. The Court explained that it has broad discretion in determining whether an action should be dismissed based upon another pending action where there is a substantial identity of the parties, the two actions are sufficiently similar, and the relief sought is substantially the same. Although the Court noted that the instant action related to the same properties as the prior, pending action, because the allegations in the instant action relate to different wrongs, including wrongs of a different nature and wrongs committed at different times and different damages, the action should not be dismissed on the ground that there is another pending action. (November 9, 2016)

In Safka Holdings, LLC v. 220 West 57th Street Limited Partnership, the New York Supreme Court, Appellate Division, 1st Department, addressed whether a prospective seller fulfilled its contractual obligations to the prospective buyer by timely providing all requested due diligence information. In dismissing the prospective buyer’s action for breach of contract, the court held that the prospective buyer’s claims that the prospective seller’s responses were either incomplete or provided too late were inconsistent and unsupported by the record. The court also noted that the prospective buyer failed to give the prospective seller notice of and an opportunity to cure any deficiencies prior to bringing suit, as required by their agreement. (September 27, 2016)

In Limoliner, Inc. v. Dattco, Inc., where a limousine business claimed its automobile repair shop failed to write down its specific request to repair one of its vehicle’s key electrical components in violation of a regulation promulgated pursuant to G.L. c. 93(a), the Supreme Judicial Court of Massachusetts addressed whether the regulation applies to transactions in which the customer is a business entity. The court held that 940 Code Mass. Regs. 5.05 applies to corporations as well as natural persons because the regulation refers only to “customers,” which is defined as “any person,” and not “consumers,” which is defined as “natural persons.” (September 7, 2016)

In IE Test, LLC v. Carroll, the Supreme Court of New Jersey considered the circumstances under which section 3(c) of the Limited Liability Company Act, N.J.S.A. 42:2B-24(b)(3)(c), authorizes the expulsion of a member of a limited liability company (LLC). The Court held that in order to dissociate a member who allegedly engaged in conduct which makes it “not reasonably practicable to carry on the business,” the trial court should consider whether: (1) the member’s conduct relating to the LLC’s business; (2) with the member remaining a member, the entity may be managed so as to promote the purposes for which it was formed; (3) the dispute precludes them from working with one another to pursue the LLC’s goals; (4) whether there is a deadlock; (5) despite that deadlock, members can make decisions on management of the company pursuant to the operating agreement or in accordance with applicable statutory provisions; (6) there is still a business to operate; and (7) continuing the LLC, with the member remaining as a member, is financially feasible. (August 2, 2016)

In Cornwall Management Ltd. v. Kambolin, the New York Supreme Court, Appellate Division, 1st Department, addressed whether allegations that Kambolin and Atlant Capital Holdings controlled and dominated Thor United were sufficient to state a cause of action for alter ego liability. Specifically, the complaint alleged that Kambolin, after relinquishing his interest in Thor United, continued to dominate it by controlling its bank account and decision making, and that Thor United and other entities controlled by Kambolin, including Atlant Capital, commingled funds and shared a business address. In holding that the allegations were insufficient to establish the alter ego theory, the court explained that the complaint failed to allege specific facts to establish actions taken by Thor United or its owners in connection with the alleged scheme to avoid repayment of loans or that Kambolin’s control of Thor United encompassed any such actions. (June 14, 2016)

In Citigroup Inc. v. AHW Investment Partnership, MFS, Inc., the Supreme Court of Delaware addressed the question of if a plaintiff’s claims against a corporate defendant, alleging damages based on the plaintiff’s continuing to hold the corporation’s stock in reliance on the defendant’s misstatements as the stock diminished in value are properly brought as direct or derivative claims. The court held that the claims brought by the stockholder are direct because the claims belong to the stockholder, who allegedly relied on the corporation’s misstatements to her detriment. Her claims are not derivative because they cannot belong to the corporation itself. (May 24, 2016)

In Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, the United States Supreme Court addressed whether §27 of the Securities Exchange Act of 1934 provides federal jurisdiction over state law claims seeking to establish liability based on violations of the Federal Exchange Act or its regulations. The Court held that the jurisdictional test established by §27 is the same as the general federal question statute, 28 U.S.C. §1331, which confers federal jurisdiction over all civil actions “arising under” federal law. The court held that the federal court lacked jurisdiction because all claims sought relief under state laws and none necessarily raised a federal issue. (May 16, 2016)

In Sterling Laurel Reality, LLC v. Laurel Gardens Co-Op, Inc., the Superior Court of New Jersey, Appellate Division, held that a majority of a board could not amend the bylaw definition of a quorum, for purposes of shareholder meetings, from a majority of the shareholders to 20% of the shareholders because to do so would allow the board to reduce the rights of the shareholders without their involvement. The court reasoned that N.J.S.A. 14A:5-9 provides that, unless otherwise provided in the certificate of incorporation, the holders of shares entitled to cast a majority of the votes at a meeting constitute a quorum at such meeting. Therefore, if the certificate of incorporation is silent on the matter, only an amendment to the certificate of incorporation, which could only be approved by a vote of the shareholders, could legally alter the shareholder-quorum requirement defined by N.J.S.A. 14A:5-9. (April 5, 2016)

In Wolverine Flagship Fund Trading Limited, et al. v. American Oriental Bioengineering, Inc., the Superior Court of New Jersey, Appellate Division, addressed whether the Uniform Commercial Code as adopted by New Jersey, required actual seizure of certified shares owned by a debtor before a creditor could reach the debtor’s interest in the certified shares. The court held that actual seizure of certified shares is required before a creditor may reach a debtor’s interest in those shares. (March 11, 2016)

In Hazout v. Ting, the Supreme Court of Delaware found 10 Del. C. §3114(b), the statute dealing with personal jurisdiction over a non-resident officer of a company, provided jurisdiction over the Canadian President, CEO and Director of a Delaware corporation who was sued in his official capacity ­in Delaware for unjust enrichment, fraud and fraudulent transfer in violation of the Delaware Uniform Fraudulent Transfer Act. The court noted that the plain language of the statute permits jurisdiction over non-resident officers when the officer is a necessary party to the action and/or if the action is for violation of the officer’s duty. Further, the specific claims against the officer in this case arose over a transaction whose documents specifically referenced the applicability of Delaware law, thus providing jurisdiction over the office in addition to the 10 Del. C. §3114(b). (February 26, 2016)

In Ring v. The Elizabeth Foundation for the Arts, the New York Supreme Court, Appellate Division, 1st Department, addressed, among other things, whether a purchase-of-assets transaction can be deemed a de facto merger. The court explained that one of the elements of a de facto merger is continuity of ownership, which exists where the shareholders of the predecessor corporation become direct or indirect shareholders of the successor corporation. However, because this action involved a not-for-profit corporation’s purchase of assets of another not-for-profit corporation, and not-for-profits do not have owners, the court held that continuity of ownership is not an essential element of de facto merger of nonprofits, as it is for a finding of a de facto merger of for-profits. Accordingly, the court examined the other elements of de facto merger in determining whether the not-for-profit corporation can be held liable under the theory of de facto merger. (February 16, 2016)

In Culverhouse v. Paulson & Company Inc.,the Supreme Court of Delaware addressed whether a diminution in the value of a limited liability company, which serves as a feeder fund in a limited partnership, provide a basis for an investor’s direct suit against the general partners when the company and the partnership allocate losses to investors’ individual capital accounts and do not issue transferrable shares and losses are shared by investors in proportion to their investments. The investor-plaintiff lacked standing to bring suit because his claim was derivative. That is, he invested in the feeder fund and not directly into the investment fund, so any harm flowing from the investment fund would not be suffered by the investor-plaintiff in the first instance. (January 26, 2016) 

In Doyle v. Icon, LLC, the New York Supreme Court, Appellate Division, 1st Department, held that the Limited Liability Company Law applies where there is no written operating agreement, and the law “does not preclude the members of an informally operated limited liability company from unanimously agreeing upon a course of conduct when faced with extensive losses." (January 28, 2016)

In Klein v. The Klein Law Group, P.C., the New York Supreme Court, Appellate Division, 1st Department, found that a court’s decision to deny a petition for dissolution of a law firm was proper. The court stated that the ultimate remedy of dissolution and forced sale of corporate assets should only be applied as a last resort and was not appropriate because the areas of dissension did not impede the ability of the firm to function effectively. (December 3, 2015)

In Corwin v. KKR Financial Holdings LLC, the Supreme Court of Delaware reviewed whether the business judgment rule is the appropriate standard of review for a post-closing damages action when a merger that is not subject to the entire fairness standard of review has been approved by a fully informed, uncoerced majority of the disinterested shareholders. The Court agreed that the voluntary judgment of the disinterested stockholders to approve the merge invoked the business judgment rule standard of review. In doing so, it noted that Delaware corporate law has long been reluctant to second-guess the judgment of a disinterested stockholder majority that determines that a transaction with a party other than a controlling stockholder is in their best interests. (October 2, 2015)

In Delaware County Employees Retirement Fund v. A.R. Sanchez, the Supreme Court of Delaware reviewed whether a plaintiff pled adequate facts to support an inference that a director could not act independently of an interested director for purposes of demand excusal. When making such a determination, all of the particularized facts pled by a plaintiff about the relationships between the director and the interested party in their totality, and not in isolation from each other, must be considered and all reasonable inferences from the totality of those facts drawn in favor of the plaintiff. The Court allowed the derivative action to go forward because it found the plaintiffs pled not only that the director had a close friendship of over half a century with the interested party, but that consistent with that deep friendship, the director’s primary employment (and that of his brother) was as an executive of a company over which the interested party had substantial influence and other similar facts which, ultimately, supported an inference that a majority of the board who approved the interested transaction they challenged could not consider a demand impartially. (October 2, 2015)

In Trinity Wall Street v. Wal-Mart Stores, Inc., the United States Court of Appeals for the Third Circuit addressed whether a corporation can omit a shareholder proposal from its proxy materials asking the Board of Directors to develop and implement management standards for use in deciding whether to sell products that endanger the public and that could potentially impair the reputation of the corporation. The court held that the corporation properly omitted the proposal under the ordinary business exclusion because deciding what products to sell goes to the heart of the corporation’s business. (July 6, 2015)

In Soho Snacks Inc. v. Frangioudakis, the New York Supreme Court, Appellate Division, 1st Department, addressed the application of the business judgment rule to a suit brought by minority shareholders alleging that the corporate directors acted with self-interest as they received a personal benefit as owners of the corporations to which they diverted opportunities. The court held that the minority shareholders adequately alleged wrongdoing so that the court could not dismiss the suit, at that time, under the business judgment rule. (June 30, 2015)

In Hays v. Ellrich, the Supreme Judicial Court of Massachusetts held that an investment advisor constituted a “seller” under the Massachusetts Uniform Securities Act (MUSA) because he indirectly benefited from his client’s investment in his new fund, and held that he was liable to his client under MUSA after the fund became insolvent. The court also held, with respect to the statute of limitations, that, “where an investment advisor owes a fiduciary duty of disclosure to his or her client and violates the act by misleading the client regarding the suitability of an investment, Massachusetts law deems it fraudulent concealment for the fiduciary to fail to reveal to the client that the investment was not suitable, and the limitations clock begins to run only when the client has actual knowledge of the unsuitability of the investment.” (June 10, 2015)

In Trexler v. McDonald’s Corporation, the Superior Court of Pennsylvania addressed whether a complaint against a corporate franchisor can be properly served on a franchisee. The court ruled that a franchise location is not a “regular place of business” of the franchisor, and the franchisee’s employees are not the franchisor’s employees. As such, service of the complaint on a franchisee employee was insufficient. (June 3, 2015)

In Lido Beach Towers v. Denis A. Miller Insurance Agency, Inc., the New York Supreme Court, Appellate Division, 2d Department, addressed whether a corporate officer of an insurance company could be held personally liable for allegedly failing to procure and maintain sufficient flood coverage insurance limits on property damaged during Superstorm Sandy. The Court noted that a corporate officer may be personally liable for torts committed in the performance of his corporate duties, but may not be held personally liable on contracts of his corporation, provided he does not purport to bind himself individually under such contracts. Here, the corporate officer established that he did not engage in any independent tortious conduct when handling the insurance policy at issue. Further, the corporate officer demonstrated that there was no evidence that he intended to be personally bound by the insurance policy. (May 27, 2015)

In Vale v. Valchuis, the Supreme Judicial Court of Massachusetts addressed whether the valuation of stock, pursuant to a stock transfer restriction, was a proper subject for arbitration and, if so, whether and when a selling shareholder may terminate the arbitration process. The transfer restriction in that case required the shareholder first to offer the stock to the company at his desired price, and then, if the company rejected it, to offer it at a price to be determined by arbitrators. The shareholder tendered an offer to the company, but subsequently changed his mind about selling his stock and sought to withdraw from the process of valuing his stock. The company moved to compel arbitration. The Court held that a stock’s valuation could be conducted through arbitration, so long as an actual controversy existed regarding the value of the stock. The Court also held that a shareholder could not unilaterally withdraw the controversy from arbitration once the arbitration had commenced, but that because the shareholder in that case had decided not to sell the stock prior to the commencement of arbitration, the controversy to be arbitrated was rendered moot. (May 22, 2015)

In In re Cornerstone Therapeutics Inc., Stockholder Litigation, the Supreme Court of Delaware addressed whether a stockholder seeking only monetary damages must plead non-exculpated claims against a disinterested director who is protected by a charter exculpatory provision. The court held that, even if the stockholder states a claim against the interested director, and the claim would be subject to the entire fairness standard of review, the disinterested director does not have to remain a defendant absent a non-exculpated claim against him. (May 14, 2015)

In ACA Financial Guaranty Corp. v. Goldman, Sachs & Co., the New York Court of Appeals addressed the pleading requirements for a claim of fraud in the inducement or fraudulent concealment in the context of financial securities. A guarantor alleged that a financial institution concealed that a hedge fund that selected the securities in the collateralized debt obligation (CDO) at issue was taking a “short” position in the CDO. The court held that the guarantor’s specific inquiries into the hedge fund’s intentions and its allegations that the financial institution affirmatively misrepresented the hedge fund’s intentions were sufficient to establish that the guarantor justifiably relied on the financial institutions’ misrepresentations. (May 7, 2015)

In 14701 & Allen Bodner v. Harry Grunstein, the New York Supreme Court, Appellate Division, 1st Department, addressed whether a corporate officer-defendant in a shareholder derivative action, who held management positions and whose brother was the “prime mover in the underlying transaction complained of” and claimed to control the entities, was sufficiently disinterested and independent so as to establish that the plaintiff’s demand on the board would have been futile. The court held that plaintiff set forth sufficiently particularized facts to raise a reasonable doubt that the defendant, the only individual upon whom demand to bring suit could be made, was disinterested and independent, noting that the potential for the defendant’s individual liability was more than a “mere threat,” and that the defendant had operated as a willing extension of his brother in related transactions that resulted in litigation. (April 2, 2015)

In Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund,the United States Supreme Court addressed how Section 11 of the Securities Act of 1933 pertains to statements of opinion. Section 11 gives purchasers of securities a right of action against an issuer for material misstatements or omissions in registration statements. As to material misstatements, the Court held that a statement of opinion may constitute a factual misstatement if the opinion expressed was not sincerely held or if it embeds statements of untrue facts. As to material omissions, the Court held that a statement of opinion may be rendered misleading by the omission of discrete factual representations. (March 24, 2015)

In Derry Street Pub, Inc. v. Pennsylvania State Police, the Commonwealth Court of Pennsylvania addressed whether a renewed liquor license remains subject to the restrictions of a prior conditional licensing agreement (CLA) with the Liquor Control Board. The court held that, pursuant to the Pennsylvania Liquor Code, a CLA remains in effect unless and until a subsequent agreement or a grant of rescission by the Board. Therefore, a renewed license carries with it the same restrictions as any former CLA. (March 24, 2015)

In Nationwide Emerging Managers v. Northpointe Holdings, the Supreme Court of Delaware addressed whether a court may award damages for the termination of a contract over the amount available under the express terms of the contract.  The Court held that a court cannot reform a contract in a way that directly contradicts evidence presented by both parties. (March 18, 2015)

In Scott v Pro Mgt. Servs. Group, LLC., the New York Supreme Court, Appellate Division, First Department, addressed whether a shareholder suing for unjust enrichment for using a companies' trademarks was subject to the pleading requirements of Business Corporation Law § 626(c). The court found that shareholder’s claim for unjust enrichment was direct and not derivative, noting that shareholder had sufficiently pled its percentage ownership in the company and the disparate treatment it received with respect to the remaining shareholders. As such, shareholder was not required to plead with particularity its efforts to secure the initiation of a derivative action by the board or the reasons for not making such effort. (January 13, 2015)

In Braun v. Wal-Mart,the Supreme Court of Pennsylvania addressed whether the class action proceedings impermissibly subjected an employer to trial by formula, which relieved the employees of their burden to produce class-wide “common” evidence on key elements of their claims.  The court held there was a single, central common issue of liability among all 187,979 class members:  whether the employer failed to compensate its employees in accordance with its own written policies.  Assessing damages based on a computation of the average rate of an employee’s pay multiplied by the number of hours for which pay should have been received is not an impermissible trial by formula. (December 17, 2014)

In Grimes v. Enterprise Leasing, the Supreme Court of Pennsylvania addressed the ascertainable loss provision of the Unfair Trade Practices and Consumer Protection Law.  The court held that a consumer did not suffer an ascertainable loss when her only loss occurred when the consumer hired an attorney and incurred litigation costs to challenge allegedly wrongful conduct, even though the consumer paid no money to the defendant-company related to the alleged conduct. (December 15, 2014)

In Khazin v. TD Ameritrade Holding Corp., the United States Court of Appeals for the Third Circuit addressed whether whistleblower retaliation claims brought under the Dodd-Frank Act are exempt from pre-dispute arbitration agreements.  The court held that the anti-arbitration provisions apply only to disputes arising under the Sarbanes-Oxley Act of 2002 and the Commodity Exchange Act, and that no provision prohibited arbitration of the employee’s retaliation claims under the Dodd-Frank Act. (December 8, 2014)

In Matter of Kenneth Cole Productions, Inc., the New York Supreme Court, Appellate Division, First Department, addressed whether the plaintiff stated a claim for breach of fiduciary duty against the majority shareholder of a New York corporation.  The court held that “pre-discovery dismissal based on the business judgment rule was appropriate since there are no allegations sufficient to demonstrate that the members of the board or the special committee did not act in good faith or were otherwise interested.” (November 20, 2014)

In Manning v. Merrill Lynch,  the United States Court of Appeals For the Third Circuit  held that it did not have federal question jurisdiction over this suit which involves claims of racketeering and securities fraud of the naked short selling of stock against the defendants.  The court held that a federal question is not raised when a plaintiff can prevail on their claims under the state laws without having to prove a violation of federal law, specifically in this case, the state RICO Act. (November 10, 2014)

In Sina Drug Corporation v. Mohyuddin, the New York Supreme Court, Appellate Division, First Department addressed the issue of whether a claim brought in violation of a duly executed settlement agreement was barred and whether plaintiffs were entitled to attorney’s fees for the action improperly commenced by defendant. The court found that defendant had improperly commenced litigation following the execution of a settlement agreement extinguishing all claims arising from the dispute that was the subject of the agreement, including plaintiff’s issuance of K-1 statements with $1.27 million in tax consequences for defendant. The court noted that there was nothing in the contract that intended to alleviate defendant of tax consequences associated with the ordinary operations of a subchapter S corporation, which must issue K-1 statements reflecting shareholder ownership. (November 13, 2014)

In ADS Associates Group, Inc. v. Oritani Savings Bank, the Supreme Court of New Jersey addressed whether a person who is not a customer” of a bank may assert a Uniform Commercial Code (UCC) Article 4A claim against a bank.  The court held that a person must be a customer in order to assert a UCC Article 4A claim against a bank.  The court also held that the non-customer was not permitted to assert a common law negligence claim against the bank because such a claim would contravene the objectives of Article 4A. (September 30, 2014)

In EV3, Inc. v. Lesh, the Supreme Court of Delaware addressed whether a non-binding provision in a letter of intent was in fact binding as a result of integration clause in a merger agreement which stated the letter of intent was not superseded by the merger agreement.  The Court held that the integration clause had the effect of ensuring that the expressly binding provisions contained in the letter of intent – which negotiating parties in the merger and acquisition context often expect to survive – would not be extinguished by the integration clause. (September 30, 2014)

In Staiger v. Holohan, the Superior Court of Pennsylvania addressed whether dissolution of jointly owned limited liability companies (LLCs) is appropriate where they are operating at a profit but one of the owners was being excluded from making business decisions.  The court held that dissolution was warranted because the operating agreement required a majority vote to make business decisions, and therefore in a business owned fifty-fifty by two owners, their disagreement created deadlock. (September 17, 2014)

In Retirement Plan for General Employees of the City of North Miami Beach v. The McGraw-Hill Companies, Inc., the New York Supreme Court, Appellate Division, First Department, addressed whether the shareholders should have commenced a shareholders’ derivative action instead of filing a petition under BCL § 624 in order to obtain access to the company’s books and records.  The court held that the shareholders acted “in good faith and for a proper purpose in seeking to enforce their common-law right to inspect respondent’s books and records” to “investigate alleged misconduct by management.”  Further, the court held that “the common-law right of inspection is broader than the statutory right, [and] petitioners are entitled to inspect books and records beyond the specific materials delineated in BCL § 624(b) and (e).” (September 11, 2014)

In Magee v. Magee, the New York Supreme Court, Appellate Division, Second Department, addressed the issue of liquidation of assets pursuant to CPLR 6401 after a partnership is dissolved.  After the partnership at issue was dissolved, the plaintiff sought to have a temporary receiver wind up the affairs of the partnership and liquidate and distribute its assets.  The court denied the plaintiff’s request, holding that the plaintiff failed to make a clear evidentiary showing that the partnership’s property was in danger of being lost, injured, or destroyed. (August 20, 2014)

In MMI Trading, Inc v. Nathan H. Kelman, Inc., the New York Supreme Court, Appellate Division, 2d Department, addressed whether a dissolved corporation could sue or be sued on its obligations until its affairs are fully adjusted. The court found that, although the plaintiff had been dissolved by an October 2010 Proclamation/Annulment of Authority for failure to pay its franchise taxes, it had retained the capacity to maintain this action against the defendants to adjudicate its pre-dissolution claims. (August 6, 2014)

In Halliburton Co. v. Erica P. John Fund, Inc., the Supreme Court of the United States addressed whether a class action alleging violations of section 10b of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5 must show that reliance on the stock price was the cause of injury at the class certification stage. The court held that there was no “special justification” to overrule the presumption of reliance established in Basic Inc. v. Levinson (there is a rebuttable presumption that the price of publicly traded stock reflects all public and material information, and that investors rely on this stock price). The court further held that plaintiffs did not have to prove direct price impact of a material misrepresentation at the class certification stage, but that defendants must be afforded an opportunity to rebut the presumption of reliance with evidence of a lack of price impact before class certification. (June 23, 2014)

In Biolase, Inc. v. Oracle Partners, L.P., the Supreme Court of Delaware held that 8 Del. C. § 141(b) is permissive in nature and does not require a director to resign in writing.  The section at issue reads “[a]ny director may resign at any time upon notice given in writing or by electronic transmission to the corporation.” The Court followed two decades of precedent, which determined that the inclusion of the word “may” makes the statute permissive and does not mean “may only.” (June 12, 2014)

In Crothall v. Zimmerman, the Supreme Court of Delaware, addressed whether the former trial counsel of a plaintiff in an unsuccessful derivative action could collect attorney’s fees from a defendant corporation where trial counsel had obtained a provisional judgment in favor of the plaintiff before the case was ultimately dismissed.  The court held because the plaintiff had abandoned the lawsuit before the trial court entered any appealable final judgment, trial counsel had not created any corporate benefit and was not entitled to attorney’s fees from the defendant corporation. (June 9, 2014) 

In Freedman v. Redstone, the United States Court of Appeals for the Third Circuit addressed the derivative and direct claims made by a shareholder of Viacom against the Board of Directors for awarding excess compensation to its executives.  The court dismissed plaintiff’s derivative claim because he failed to make a pre-suit demand on Viacom’s Board or explain why a demand would have been futile.  Plaintiff’s direct claim failed as well, as the court held that the holder of non-voting shares could not use federal tax law concerning the deductibility of performance-based compensation to create rights that did not otherwise exist. (May 30, 2014)

In ATP Tour, Inc. v. Deutscher Tennis Bund, the Supreme Court of Delaware addressed four certified questions of law, pertaining to the validity of a fee-shifting provision in a Delaware non-stock corporation’s bylaws, which allowed directors to amend the bylaws and shift attorneys’ fees and costs to the unsuccessful plaintiffs in intra-corporate litigation. Although the court did not directly address the enforceability of the bylaw at issue in the case, it held that “fee-shifting provisions in a non-stock corporation’s bylaws can be valid and enforceable under Delaware law,” even if that fee shifting bylaw is adopted after entities join the corporation, as long as the bylaw was not adopted for an improper purpose. (May 8, 2014)

In John v. State Farm Mutual Automobile Insurance Company, the New York Supreme Court, Appellate Division, 2d Department, addressed whether parties to an insurance policy “‘may agree to limit the period of time within which an action must be commenced to a period shorter than that provided by the applicable statute of limitations.’”  The court held that the limitations period may be shortened absent a showing that “‘the party against which the abbreviated…[period] is sought to be enforced’” was induced to enter such agreement by fraud, duress, or misrepresentation. (April 30, 2014)

In George Tsunis Real Estate, Inc. v. Benedict, the New York Supreme Court, Appellate Division, 2d Department, addressed whether a six-year statute of limitations barred the plaintiff’s action to recover a real estate brokerage commission.  The court held that the plaintiff raised a triable issue of fact as to whether the defendants “acknowledged the plaintiff’s entitlement to a brokerage commission and demonstrated the defendants’ intent to pay it, thus restarting the statute of limitations.” (April 30, 2014)

In Village of Ilion, v. County of Herkimer, the New York Court of Appeals addressed whether a village’s contractual liability arising from its withdrawal from participation in an insolvent workers’ compensation self-insurance plan should be discounted to present value.  The court held that the abandonment plan contract provided that withdrawal liability would be determined by a 2005 Reserve Analysis, which calculated each member’s liability based upon undiscounted future losses.  Since the 2005 Reserve Analysis included future damages, discounting was appropriate. (May 1, 2014)

In Lawson v. FMR LLC., the United States Supreme Court addressed whether private subcontractors of publicly traded companies are fully protected under the Sarbanes-Oxley Act for corporate whistleblowers.   The Court  determined  that investment advisors and other “independent contractors” employed in the mutual fund industry are fully protected under the whistleblower provisions of the Sarbanes-Oxley Act.   This ruling reversed a lower court holding which excluded the mutual fund industry from said protection. (March 4, 2014)

In Chadbourne & Parke LLP v. Troice, the Supreme Court of Pennsylvania addressed whether lawsuits, filed under state laws, were proper in light of the Securities Litigation Uniform Standards Act of 1998, which prohibits state-law class actions based on asserted fraud “in connection with the purchase or sale of a covered security.”  The Court held that the Ponzi scheme operated by the defendant did not concern covered securities traded on a national exchange, thus the lawsuits could proceed under state laws. (February 26, 2014)

In R Ball for R Ball III v. Commissioner of IRS, the United States Court of Appeals for the Third Circuit analyzed tax implications of an S Corp.’s election to treat its subsidiary as a “qualified subchapter S subsidiary” (Qsub) under Internal Revenue Code § 1361.  More specifically, the court examined whether a Qsub election creates an “item of income” for the parent corporation under § 1366(a)(1)(A).  The court found that the gain is not recognized and therefore cannot be deemed an “item of income” under § 1366. (February 12, 2014)

In Kafa Investments, LLC, v. 2170-2178 Broadway LLC, the New York Supreme Court, Appellate Division, First Department, addressed whether language in an agreement of sale that released defendants from  “any and all claims,” “known and unknown” barred an action for fraud arising from the alleged intentional misrepresentation of the value of the property sold.  The court noted that although the defendants are arguably the fiduciaries of the plaintiffs that did not invalidate the release, since the plaintiffs were sophisticated parties represented by counsel. (February 4, 2014)

In Hill v. Ofalt, the Superior Court of Pennsylvania addressed whether a part owner of a corporation could bring a direct action against his co-owner for wasting, diverting and stealing corporate assets.  The court held that plaintiff could not bring a direct action against the co-owner for damages to the corporation or indirect damages resulting from an injury to the corporation.  Plaintiff was granted leave to amend his complaint to assert a shareholder derivative action on behalf of the corporation. (February 5, 2014)

In Zuckerbrod v. 355 Company, LLC, the New York Supreme Court, Appellate Division, addressed the sufficiency of evidence to substantiate claims of fraud, bad faith, and breach of fiduciary duty. The court cited the business judgment rule, which “bars judicial inquiry into actions of corporate directors taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes,” in holding that the mere speculation that evidence might be uncovered through discovery was insufficient proof of the alleged wrongdoings. (January 15, 2014)

In Douglas G. Bailey v. Astra Tech, the Appeals Court of Massachusetts addressed whether shareholders had the power to negotiate a settlement with the corporation in view of a standing agreement that any dispute “shall be settled by mutual agreement” between the corporation and the shareholders’ agent.  The Court construed the agreement to mean that the shareholders’ agent had a broad but not exclusive power to settle disputes, and it thus held that settling shareholders did have the power to negotiate a settlement. (December 4, 2013)

In Activision Blizzard, Inc v. Hayes, the Supreme Court of Delaware reversed the trial court’s preliminary injunction halting consummation of a stock purchase agreement in which Vivendi would have divested itself of its controlling interest in Activision.  Previously, in 2007, Activision and Vivendi entered into a business combination agreement.  The agreement required that any further merger of the two companies—which, resulted in Vivendi gaining more control through a value-moving transaction—would require a majority of stockholders unaffiliated with Vivendi to approve the transaction.  In 2013, Vivendi tried to sell its shares to Activision.  The court held determined that the agreement only requires a majority vote if Vivendi was gaining greater control over Activision. (November 15, 2013)

In Cruz v. TD Bank, N.A., the New York Court of Appeals addressed: (i) whether plaintiff judgment debtors have a private right of action for money damages and injunctive relief against banks that violate the Exempt Income Protection Act of 2008’s (the EIPA) procedural requirements; and (ii) whether judgment debtors can seek money damages and injunctive relief against banks that violate EIPA in special proceedings under CPLR Article 52 and, if so, whether those special proceedings are the exclusive mechanism for such relief, or relief may also come in the form of a plenary action.  As for the first issue, the court held that plaintiffs only had an implied (not an express) private right of action under the EIPA if an intent to create a private right of action could be inferred from the legislative scheme, which it could not: the Legislature did not intend to impose new liability on banks acting as garnishees of the funds of judgment debtors.  With respect to the second issue, the court held that because the EIPA creates no private right of action, a CPLR Article 52 proceeding is the exclusive form of relief for a judgment debtor who brings an action against a bank for an EIPA violation. (November 21, 2013)

In Anderson v. Krafft-Murphy Co., the Supreme Court of Delaware addressed procedural and substantive issues raised in an action to appoint a receiver of a dissolved corporation under Delaware law. The first issue addressed whether a contingent contractual right, in this case an insurance policy, constitutes “property” within the meaning of 8 Del. C Sec. 279.  The court concluded that contingent contractual rights, such as unexhausted insurance policies, constitute “property” of a dissolved corporation, so long as those rights are capable of vesting.  The second issue was whether Delaware’s statutory corporate dissolution scheme, 8 Del. C. Sec. 278-28, contains a generally applicable statute of limitations that time-bars claims by third parties against a dissolved corporation.  The court concluded that Delaware’s dissolution statutes impose no generally applicable statute of limitations that would time-bar claims against a dissolved corporation by third parties.  Finally, the third issue involved whether, after the three-year winding up period, a dissolved corporation has the power to act, absent a court-appointed receiver or trustee.  The court held that the existence of the “body corporate” continues beyond the expiration of the statutory winding-up period for purposes of conducting litigation commenced before the expiration of that period,but for litigation commenced after the expiration of that statutory period, a dissolved corporation may act only through a receiver or trustee. (November 26, 2013)

In Fair Laboratory Practices Assoc. v. Quest Diagnostics, Inc., the United States Court of Appeals for the Second Circuit addressed whether former general counsel to defendant and current general partner of the plaintiff violated his ethical obligations by participating in the qui tam action and whether plaintiff, all of its general partners, and its outside counsel could be disqualified from bringing any subsequent qui tam actions based on similar facts.  The court held counsel acted unethically in disclosing client confidences and the False Claims Act does not preempt state ethical rules.  Further, plaintiff, its general partners and its outside counsel could be disqualified from bringing any subsequent action based on the same facts. (October 25, 2013)

In Gjuraj v. Uplift El. Corp., the New York Supreme Court, Appellate Division, First Department addressed a breach of fiduciary duty claim brought individually and derivatively by a minority shareholder of a corporation.  The court held that because the corporation’s majority shareholder distributed profits to an employee without making a distribution to the plaintiff and because the majority shareholder closed the corporation’s bank account on which the plaintiff was a signatory and opened a new corporate account on which the plaintiff was not a signatory, the majority shareholder had breached its fiduciary duty to the plaintiff. (October 22, 2013)

In Winshall v. Viacom International, the Supreme Court of Delaware addressed the implied covenant of good faith and fair dealing where the corporation allegedly had the opportunity to increase “earn-out” payments to selling shareholders per a merger agreement, but did not do so.  The court held that no such obligation could be implied under the terms of the merger agreement, and the implied covenant could not be applied to give one contractual protections that they failed to secure for themselves at the bargaining table.  The court also addressed whether the merger agreement imposed a duty to indemnify for defense costs, and held it did not because indemnification was only permissible for breach of a representation or warranty in the merger agreement, and no such allegations were established. (October 8, 2013)

In Williams v. Charles, the Appeals Court of Massachusetts addressed the standing of members of a Massachusetts limited liability company to bring derivative claims on the company’s behalf against the company’s manager and whether contribution in the form of services rather than cash should be included in calculating a member’s votes.  Massachusetts statute provides that a derivative suit on behalf of a limited liability company may be brought by any member who is authorized by a vote of the members who own more than fifty percent of the unreturned contributions to the limited liability company. The court held that, unless the company’s operating agreement provides otherwise, member contributions consisting of property and services, in addition to cash, should be treated as contributions for the purposes of standing. (October 3, 2013)

In Central Laborers’ Pension Fund v. Blankfein, the Supreme Court of New York, Appellate Division, denied the availability of an award of attorneys’ fees to a plaintiff in a putative shareholder derivative action because the plaintiff failed to make a pre-suit demand upon the board for the desired action and did not show that such a demand would have been futile. The court found that, even though the action resulted in a substantial benefit to the corporation, that benefit could have been achieved at a lesser cost had the plaintiff first made a demand. (September 17, 2013)

In Canmore Consultants LTD. v. L.O.M. Medical International, Inc., the Court of Chancery of Delaware reviewed which party bears the burden of persuasion in the application of 8 Del. C. sect. 223(c), to allows stockholders in limited circumstances to petition the Court to direct that a special stockholder’s meeting take place to fill vacancies on the corporate board through exercise of the stockholders’ franchise.  It determined that plaintiffs hold the burden and must show:  1) that only a minority of directors remain on the board at the pertinent time; 2) that the plaintiffs represent at least ten percent of outstanding shares, and 3) that the equities support their request. (September 19, 2013)

In Brigade Leveraged Capital Structures Fund Ltd. v. PIMCO Income Strategy Fund, the Supreme Judicial Court of Massachusetts addressed whether a company, whose bylaws provided that regular shareholder meetings be held “on at least an annual basis,” could permissibly schedule only one shareholder meeting in each fiscal year, even where such scheduling would result in the meetings falling nearly two calendar years apart by occurring at the beginning of the earlier fiscal year and the end of the later fiscal year. The court concluded that the phrase “annual basis” was ambiguous and should be construed against the drafters (here the corporation) and, consequently, concluded that the corporation was required to schedule its annual shareholders’ meeting no later than thirty days after the anniversary of the last annual shareholders’ meeting for the benefit of shareholders. (September 11, 2013)

In DV Realty Advisors LLC v. Policeman’s Annuity & Benefit Fund of Chicago, the Supreme Court of Delaware addressed the standard for removal of a general partner pursuant to a limited partnership agreement (LPA). Because the Delaware Revised Uniform Limited Partnership Act gives maximum effect to the principle of freedom of contract, the limited partnership seeking removal was required to demonstrate, pursuant to the LPA at issue, that they made a good faith determination that removal was in the best interests of the partnership.  Due to the general partner’s failure to provide timely audited financial statements, the court found that the limited partnership had a good faith basis for removal. (August 26, 2013)

In Miller v. Palladium Industries, the Supreme Court of Delaware determined whether the board of directors (Board) of a corporation properly denied a director’s request for advancement of fees and expenses incurred in defending himself against a breach of fiduciary duty lawsuit when a bylaw provided that such expenses “shall be paid by the corporation in advance of [a] final disposition unless otherwise determined by the Board of Directors in the specific case[.]”  The court found the Board’s denial was proper because another bylaw provided that entitlement to advancement only becomes mandatory if the Board does not act within a specified time, and the Board did act within that time. (July 19, 2013)

In Alliance for Building Communities, Inc. v. County of Lehigh Board of Assessment Appeals, the Commonwealth Court of Pennsylvania addressed whether the Alliance for Building Communities qualified as a purely public charity for real estate tax exemptions for 20 of its properties under the Pennsylvania Constitution.  The court held that, before evaluating the status of the individual properties at issue, the institution is to be viewed as a whole to determine if it qualifies as a purely public charity. (July 22, 2013)

In AIG Fin. Prods. Corp. v. ICP Asset Mgt., LLC, the New York Supreme Court, Appellate Division, First Department, addressed whether AIG alleged sufficient facts to establish a cause of action for aiding and abetting fraud.  AIG alleged that ICP committed the underlying fraud by entering into an arrangement with Moore Capital Management, LP to secure mortgage backed securities pursuant to a forward purchasing agreement.  It was alleged that the forward purchasing agreement was purposely structured to deplete the assets by setting the price for the mortgage backed securities at a level higher than justified by deteriorating the market for those products.  Despite the fact that the complaint did not allege that Moore had actual knowledge of the facts supporting every element of the fraud claim, the “surrounding circumstances” permitted a reasonable inference that Moore knew of ICP’s fraud and the court noted that all that is needed to defeat a motion to dismiss a fraud claim is a rational inference of actual knowledge.  Further, AIG sufficiently plead the other element of an aiding and abetting claim, by alleging that Moore provided “substantial assistance” to ICP. (July 9, 2013)

In Boilermakers Local 154 v. Chevron, the Supreme Court of Delaware addressed the propriety of bylaws that limit investors to litigating corporate disputes in Delaware. The court held that the bylaws are valid and enforceable contractual forum selection clauses. (June 25, 2013)

In Johnson v. SmithKline Beecham Corporation., the United States Court of Appeals for the Third Circuit addressed the citizenship of a limited liability company, GSK LLC, for purposes of diversity jurisdiction. The court held that the citizenship of a limited liability company is to be determined by its members and, in this case, the sole member was a holding company, GSK Holdings. The court concluded that the holding company’s office in Delaware, though small, qualified it as a Delaware corporate citizen. (June 7, 2013)

In Gerber v. Enterprise Products Holdings, LLC, the Supreme Court of Delaware held that the “conclusive presumption of good faith” provision found within a limited partnership agreement did not bar a claim under the implied covenant of good faith and fair dealing. The court found that the standard required under the contractual good faith provision was different than what is embedded in the implied covenant of good faith and fair dealing. (June 10, 2013)

In E.R. Linde Construction Corporation v. Goodwin, the Superior Court of Pennsylvania was asked to determine whether a construction company holding a right of first refusal over a piece of real estate and various other assets effectively exercised the right by only agreeing to purchase the real property and not the remaining assets. The court held that a contractual right of first refusal over a clearly and unambiguously defined property cannot be nullified by including the covered property in a multi-asset sales agreement. (June 7, 2013)

In Bond Safeguard Insurance Company v. Alexander Forkosh, the New York Supreme Court, Appellate Division, Second Department, addressed the enforceability of an indemnity agreement against the individual managing member of a corporate entity. The court noted that the indemnity agreement “unambiguously demonstrated that [the individual], a sophisticated business person, clearly and explicitly intended to assume personal responsibility as an indemnitor under the agreement.” The court, therefore, determined that, because the individual signed the indemnity agreement in his individual capacity, he could be held personally liable under the agreement. (June 12, 2013)

In Cook v. Patient Edu, LLC, the Supreme Judicial Court of Massachusetts addressed whether managers of a limited liability company (LLC) could be held personally liable under the Massachusetts Wage Act for the unpaid wages due to an employee. Notwithstanding the fact that the statute does not expressly impose individual liability on the managers of an LLC, the court concluded that a manager who controls, directs, and participates to a substantial degree in formulating and determining the financial policy of a business entity may be a "person having employees in his service" as defined in the Wage Act and thus may be subject to liability. (June 13, 2013)

In In the Matter of Jerome Markowitz Trust, the Superior Court of Pennsylvania addressed the proper measure of a surcharge imposed on a trust company for breach of fiduciary duty in the management of investments for a trust.  The court held that the loss the trustee realized on his sale is not the proper measure of a surcharge for breach of fiduciary duty.  Rather, the court based the surcharge on the fees the trust company received compared to the size of the trust and applied that percentage to the amount of the specific transaction at issue. (May 23, 2013)

In J.P. Morgan Investment Management Inc. v. AmCash Group, LLC, the New York Supreme Court, Appellate Division, First Department, addressed whether an informational listing of a mutual fund’s day-end Net Asset Value on electronic trading sites qualified that fund as “listed on an organized securities market.”  The court held that industry custom did not regard the fund as “listed on an organized securities market” despite its appearance on those sites because the fund’s shares were not actually accepted for trading by any market or exchange. (May 21, 2013)

In Arrowgrass Master Fund Ltd. v. Bank of New York Mellon, the New York Supreme Court, Appellate Division, First Department, addressed whether a release agreement that released claims against certain note trustees and their “predecessors” was limited to their corporate predecessor or also included a predecessor trustee.  The court held that the ordinary meaning of “predecessors” included both the corporate and trustee predecessors. (May 21, 2013)

In ACA Financial Guaranty Corp. v. Goldman, Sachs & Co., the New York Supreme Court, Appellate Division, First Department, addressed the plaintiff’s claim that the defendant fraudulently induced the plaintiff to issue a financial guaranty for a portion of an investment, after the defendant fraudulently misrepresented that a nonparty hedge fund was taking a long position in the investment, when in actuality the fund was a short seller.  The court dismissed the plaintiff’s claims sounding in fraud, as the plaintiff failed to establish justifiable reliance as a matter of law and the plaintiff failed to plead that it exercised due diligence. (May 14, 2013)

In Omnicare, Inc. v. Department of Public Welfare, the Commonwealth Court of Pennsylvania addressed whether the DPW violated the Commonwealth Procurement Code by failing to consider price as an element of bids when it contracted to purchase pharmaceuticals in a competitive sealed proposal process. The court held that DPW’s failure to solicit and thereafter consider pricing information from vendors was contrary to the Code because it deprived the Director from determining whether ratification of the contract was in the best interest of the Commonwealth. The court also held that the bid protest was timely because it was filed within seven days of the notice of award being posted on the DPW website. (May 15, 2013)

In Poliak v. Keysert, the Supreme Court of Delaware addressed the application of several equitable defenses to the finding of the Court of Chancery that the sole director of a financial services company violated his fiduciary duty of loyalty when he caused the super-voting preferred stock to be issued to himself for the admitted purpose of thwarting holders of a majority of common stock from removing him as a director. The court ruled that the good faith effort by the Plaintiffs to seek settlement justified the year delay in bringing suit and therefore the doctrine of laches was not an appropriate defense to the suit. The court also concluded that the Plaintiffs did not ratify or acquiesce in the director’s self-dealing conduct, and had not waived the right to challenge the issuance of super-voting preferred stock. (May 6, 2013)

In Oppenheimer & Co. v. Northstar Agri Industries, LLC, the New York Supreme Court, Appellate Division addressed whether Oppenheimer could recover a finder’s fee for introducing Northstar to an investment firm, which ultimately invested in Northstar’s canola processing facility. The court determined that a Confidentiality & Non-Disclosure Agreement entered into between Northstar and Oppenheimer created an implied obligation on the part of Northstar to provide Oppenheimer reasonable compensation for the alleged services. (April 16, 2013)

In T. Butera Auburn, LLC v. Williams, the Appeals Court of Massachusetts addressed, in the context of a dispute over sale of a veterinary practice, whether triple damages under the Massachusetts Consumer Protection Statute (Chapter 93A) included only those damages arising specifically from unfair and deceptive trade practices or also contract damages arising out of related facts. The court confirmed that, under the language of the statute, the treble damages provision applied to any damages arising out of the same facts, including the contract damages. (April 17, 2013)

In D’Mel & Associates v. Athco, Inc., the New York Supreme Court, Appellate Division, addressed whether shareholders of a corporation can be held individually liable for allegedly fraudulent conveyances purportedly taken on behalf of the corporation. The court held that, in the context of fraudulent conveyances, a shareholder cannot be held liable without piercing the corporate veil unless it benefited from the conveyances. (April 4, 2013)

In Merriam v. Demoulas Super Markets, the Supreme Judicial Court of Massachusetts addressed whether minority shareholders in a close corporation had a fiduciary duty to offer their shares to the corporation before selling those shares to others at a below-value price.  Here, the corporation’s articles of organization provided for a stock valuation by an arbitrator and gave the company the right to buy the minority shares at the price set by the arbitrator.  After the company declined to purchase the shares, the minority shareholders sold their shares for a lower price to a third party, without first offering them to the company at the lower price, threatening the company’s S corporation tax status.  The court held that where the articles of corporation neither required a first offer to the corporation nor specified that S corporation status should be maintained, the minority shareholder’s fiduciary duty alone did not preclude the sale. (March 27, 2013)

In In re Estate of William Schrader, the Superior Court of Pennsylvania held that the Uniform Commercial Code (UCC), as opposed to the Multiple Party Account Act (MPAA), governed ownership of a cashier’s check as the item was a negotiable instrument.  Under the UCC, the decedent’s fiancée had possession over the cashier’s check at the time of death as the check was located in a strongbox in the decedent’s home along with some her own cash.  Therefore, the fiancée, as opposed to the decedent’s estate who took possession of the strongbox, was entitled to the funds. (February 26, 2013)

In Marx v. General Revenue Corp., the United States Supreme Court held that the attorneys’ fees provision in the Fair Debt Collection Practices Act (FDCPA) does not displace F.R.C.P. 54 which allows for attorneys’ fees unless a federal statute provides otherwise.  While the FDCPA’s provision provided for an award of fees for claims brought in bad faith, the Court held that this did not preclude a fee award against a litigant who brought a FDCPA claim in good faith.  Therefore, it was appropriate for the lower court to exercise its discretion to award the defendant its attorneys’ fees even though the plaintiff’s claim under the FDCPA was brought in good faith. (February 26, 2013)

In Chambers v. Gold Medal Bakery, the Supreme Judicial Court of Massachusetts addressed whether a closely-held corporation and its corporate counsel and accountants can assert attorney-client privilege or work product protection against directors-shareholders asserting claims against the corporation and its directors.  The Court concluded that such director-shareholders were not entitled to information protected by attorney-client privilege where their interests were adverse to those of the corporation. (February 8, 2013)

In Clair v. Clair, the Supreme Judicial Court of Massachusetts addressed whether, in a dispute over a family business, the executrix of a director and shareholder was entitled to discovery concerning privileged communications from corporate counsel.  The court concluded that, because the executrix of the shareholder’s estate did not step into that shareholder’s role as a director of the company, she was not entitled to have access to the privileged communications with corporate counsel beyond matters the parties had placed at issue in the case. (January 25, 2013)

In Rock v. Rangos, the Superior Court of Pennsylvania addressed the viability of a direct action brought by a former board member for breach of fiduciary duty under Delaware law. The court found that the plaintiff failed to present sufficient evidence of non-disclosure and conflict of interest in the sale of the company to overcome the business judgment rule. (January 24, 2012)

In Freedman v. Adams, et al., the Supreme Court of Delaware considered whether a derivative complaint asserting a claim for waste against the defendant corporation may be sustained where the company failed to pay executive bonuses under a Section 162(m) plan that could have resulted in significant tax savings to the company.  The Court held that the complaint failed to state a claim because it did not specifically allege that any of the executive bonuses paid would have been tax deductible under a Section 162(m) plan, and that the board of directors exercised its business judgment by intentionally choosing not to participate in such a plan, as it would have constrained the compensation committee in determining appropriate bonuses. (January 14, 2013)

In Fuges v. Southwest Financial Services, LTD, the United States Court of Appeals for the Third Circuit addressed the “reasonable interpretation” test of the Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681-1681x, that affords a safe harbor against a company’s liability for alleged willful violations of the FCRA that include an assessment of punitive damages and attorney’s fees in addition to actual consumer damages if the company reasonably interprets the statute as inapplicable to its activities.   The court held that because the FCRA only applies to a “consumer reporting agency” that furnishes a “consumer report” to a third party, a title search company reasonably interpreted the FCRA as inapplicable to its activity in furnishing a title search property report to a consumer lender that allegedly included inaccurate information concerning potential encumbrances on a consumer’s home. (December 6, 2012)

In Americas Mining Corporation v. Theriault, the Supreme Court of Delaware, addressed whether the “fair” price for the transaction wherein Southern Copper Corporation acquired the controller’s 99.15% interest in Minera Mexico, S.A. de C.V. was arbitrary and capricious.  The entire fairness analysis requires a non-bifurcated consideration of fair dealing and fair price.  In affirming the chancery court’s decision, the court held that the process by which the merger was negotiated and approved constituted unfair dealing and that resulted in the payment of an unfair price. (August 27, 2012)

In Heasley v. KSM Energy, Inc., the Superior Court of Pennsylvania addressed whether the term of an oil and gas lease calling for a flat rental, as opposed to a percentage royalty is determined by payment. The court held the period of production of oil or gas is the measure of the duration of the lease when a lessor’s compensation is subject to the volume of production. (July 27, 2012)

In Martin Marietta Materials, Inc. v. Vulcan Materials Co., the Supreme Court of Delaware addressed whether an injunction barring the plaintiff from prosecuting its pending exchange offer and proxy contest against the defendant was the appropriate remedy for the plaintiff’s violations of confidentiality agreements governing merger negotiations. The court held that because the confidentiality agreements provided that “money damages would not be [a] sufficient remedy for any breach . . . by either party,” and that “the non-breaching party shall be entitled to equitable relief, including injunction,” the relief was proper. (July 12, 2012)

In Seinfeld v. Slager, the Chancery Court of Delaware was asked to determine whether board approval of a supplemental retirement bonus was a breach of fiduciary duty to the extent that it constituted corporate waste and did not qualify for a tax deduction. In dismissing the claim, the court held that “there is no general fiduciary duty to minimize taxes.” (June 29, 2012)

In Bernier v. Bernier, the Appeals Court of Massachusetts addressed the valuation of an S corporation in the context of a divorce case. The court addressed the process used to account for income tax in splitting the distributable income from an S corporation, adopting the “tax affecting” approach even if it results in a zero percent tax affecting rate. (June 29, 2012)

In Central Laborers Pension Fund v. News Corp., the Supreme Court of Delaware addressed whether, under section 220 of the Delaware General Corporation Law, a shareholder could compel production of books and records related to an acquisition to investigate potential breaches of fiduciary duty. The court held that because the shareholder failed to attach documentary evidence of ownership, the shareholder did not comply with the form and manner of making a demand for an inspection of documents, a “statutorily fatal” error which foreclosed the right of inspection. (May 29, 2012)

In Cesar v. Sundelin, the Appeals Court of Massachusetts addressed the power of the probate judge to enforce his assignment of sole ownership of a family business during divorce proceedings. The court concluded that good will is property in the divorce context, and the court may impose a non-compete order on one spouse to preserve the value of the good will of the business for the other spouse. (May 4, 2012)

In Santomenno v. John Hancock Life Insurance Co., the United States Court of Appeals for the Third Circuit addressed whether members of an ERISA-governed employer-sponsored 401(k) benefit plan were required to first make a demand upon the trustees of the plan and join the trustees in a lawsuit to recover excessive fees.  The court held that the protective purposes of ERISA would be subverted if plan members were required to ask the trustees to sue themselves. The court reasoned that the text, structure, and purpose of ERISA indicates that Congress did not intend to impose obstacles such as pre-suit demand or mandatory joinder of trustees. (April 16, 2012)

In St. Nicholas Greek Catholic Russian Aid Society v. Pennsylvania Liquor Control Board, the Commonwealth Court of Pennsylvania addressed a challenge to the Liquor Control Board’s denial of a license renewal application. The court found there was ample evidence to support the denial of the renewal application due to the licensee’s history of citations for selling alcohol to non-members, incidents of disturbance of the property, and evidence that the licensee knew illegal activity was occurring and did not do enough to prevent it. (April 13, 2012)

In Caraco Pharmaceutical Laboratories v. Novo Nordisk A/S, the United States Supreme Court addressed the right of a generic drug manufacturer to compel amendments to the description of a patent provided to the Food and Drug Administration (FDA) in an abbreviated new drug application. The Court held that a generic drug producer may use a counter-claim under the Hatch-Waxman Amendments to force modification of a use code that allegedly overstates a brand product's patent coverage. (April 17, 2012)

In Fizzano Brothers Concrete Products, Inc. v. XLN, Inc., the Supreme Court of Pennsylvania addressed whether continuity of ownership is an essential element required to support the de factor merger exception to corporate successor liability. The court held that, where the underlying cause of action is rooted in contract or corporate law, for a de facto merger exception to be met, “some sort of” proof of continuity of ownership or stockholder interest is required. (March 26, 2012)

In T.W. Phillips Gas and Oil Co. v. Jedlicka,the Supreme Court of Pennsylvania addressed whether an oil or gas lease had produced “in paying quantities” of profits, in accordance with the lease’s habendum clause (the clause that determines the ultimate duration of the lease). The court held that, for those operations where production had been sporadic or marginal, and operating expenses exceeded profits, consideration would be given to “some period of time” over which the decreased production occurred, along with the operators’ “good faith judgment” in maintaining the well, to determine whether the well had produced “in paying quantities.” (March 26, 2012)

In Credit Suisse Securities (USA) LLC v. Simmonds, the United States Supreme Court addressed whether the failure to disclose a change of ownership interest, in compliance with §16(a) of the Securities Exchange Act of 1934, will toll the two-year time period in which a corporation or a security holder of that corporation may bring a §16(b) action to sue corporate insider(s) who realize profits from the purchase and sale or sale and purchase of a corporation’s securities within any six-month period. The Court held that the §16(b) limitation will be tolled when “fraudulently concealed facts, are, or should have been discovered by the plaintiff” and not until the filing of a §16(a) statement. (March 26, 2012)

In  In Re El Paso Corporation Shareholder Litigation, the Court of Chancery of the State of Delaware denied the stockholder plaintiffs request for a preliminary injunction to enjoin a merger between El Paso Corporation and Kinder Morgan, Inc. The court identified the following as “potential conflicts” associated with Goldman Sachs: (1) it owned approximately 19%, or $4 billion worth, of Kinder Morgan stock; (2) it controlled two of Kinder Morgan’s board seats; (3) it had placed two senior Goldman principals on the Kinder Morgan board who thus owed Kinder Morgan fiduciary duties; and (4) the lead Goldman banker working for El Paso personally owned approximately $340,000 of Kinder Morgan stock. Despite these “potential conflicts,” the court refused to enjoin the merger because the price was reasonable, and although an after-the-fact monetary damages claim against the defendants is not a perfect tool, it has some value as a remedial instrument. As such, there was no irreparable harm. (February 29, 2012)

In Bennett v. A.T. Masterpiece Homes at Broadsprings, LLC, the Superior Court of Pennsylvania addressed whether the trial court properly charged the jury when it stated that “misleading conduct” could support a violation of the Unfair Trade Practices and Consumer Protection Law’s catchall provision.  The court held that the charge was proper because the catchall provision applies to either “fraudulent or deceptive conduct.”  (March 6, 2012)

In Alta Berkeley VI C.V. v. Omneon, Inc., the Supreme Court of Delaware addressed whether the “automatic”/forced conversion of Series C-1 preferred shares to common shares prior to a merger was a breach of the certificate of incorporation.  In holding that the conversion was not a breach of contract, the court stated that: 1) the “automatic” conversion was not part of a Liquidation Event as defined by the certificate of incorporation, and 2) the conversion preceded the merger which was the only transaction constituting a Liquidation Event.  Since the Series C-1 preferred shareholders were common stockholders at the time of the Liquidation Event, they were not entitled to any liquidation preference payment. (March 5, 2012)

In Scheidt v. DRS Technologies, Inc.  the Superior Court of New Jersey held that the plaintiff’s amended complaint failed to state a claim as the averments were based upon unsupported conclusory allegations.  The plaintiff claimed that the defendant corporation and the officers and directors violated their fiduciary duties of loyalty, diligence, candor, and good faith in failing to take steps to ensure that they had obtained the best value reasonably available for DRS shareholders in a merger involving the sale of control of the company.  Among other deficiencies, the court noted that the plaintiff was required to set forth facts that would establish that the directors “utterly failed” to attempt to obtain the best sale price.  The court further upheld the exculpatory clause in DRS’s certificate of incorporation that protected its directors from personal monetary liability for any breaches of their duty of care.  Thus, no liability could be imposed on those directors and Plaintiff’s complaint was properly dismissed. (February 27, 2012)

In Custom Designs & Mfgr. Co. v. Sherwin-Williams, Co., the Superior Court of Pennsylvania, addressed whether intra-company communications concerning an impending claim written to in-house counsel were protected by the attorney-client privilege. The court held that the memorandum prepared by an employee and sent to in-house counsel was neither made at the request of counsel nor for the purpose of securing assistance in a legal matter, and therefore was not protected by the attorney-client privilege. (February 15, 2012)

In Long v. Tommy Hilfiger USA, the United States Court of Appeals for the Third Circuit was faced with the issue of whether printing the expiration month, but not the year, of a credit card on a receipt was a willful violation of the Fair and Accurate Credit Transactions Act (FACTA) which forbids merchants from printing the “expiration date” of a customer’s card on any receipt provided to the cardholder. The court held that FACTA did not permit a merchant to print even a portion of the expiration date on a receipt, but found that the merchant had not committed a willful violation of the Act as its interpretation of the phrase “expiration date” was objectively reasonable. (January 24, 2012)

In SV Investment Partners v. ThoughtWorks, the Supreme Court of Delaware addressed the meaning of “funds legally available” relating to a company’s obligation to redeem preferred stock.  The court held that “funds legally available” meant cash funds that can be legally disbursed without violating the law, rather than surplus funds. (November 15, 2011)

In Burtch v. Milberg Factors, Inc., the United States Court of Appeals for the Third Circuit addressed whether the appellant adequately pled claims under Section 1 of the Sherman Act. The court held that the exchange of credit information without any direct or circumstantial evidence of an agreement does not plausibly state a Section 1 claim under the Sherman Act. (October 24, 2011)

In CML V, LLC v. John Bax, the Supreme Court of Delaware addressed the scope of the derivative standing provisions of the Limited Liability Company Act (LLCA) with regard to a creditor’s standing to bring derivative actions on behalf of insolvent LLCs.  The court ruled that the LLCA, by its plain language, exclusively limits derivative standing to “member[s]” or “assignee[s],” not creditors, and that such limitation is constitutional to the extent that it deprives the Delaware Court of Chancery of its equity jurisdiction to prosecute derivative creditor claims. (September 6, 2011)

In In Re: First Baptist Church of Spring Mill, the Commonwealth Court of Pennsylvania considered an appeal of an Orphan's Court decision disapproving of a proposed payment of the substantial portion of proceeds of the sale of the Church's property to its pastor in accordance with the Nonprofit Corporation Law of 1988, 15 Pa. C.S. §§ 5101 - 6145 pursuant to the Church's planned dissolution. The court quashed the Church's appeal as taken from a non-appealable interlocutory order because the dissolution process requires further proceedings and is subject to the court's supervision under the Nonprofit Corporation Law. (June 10, 2011)

In Greenwood Gaming and Entertainment, Inc. v. Pennsylvania Gaming Control Board, the Supreme Court of Pennsylvania addressed whether the Pennsylvania Gaming Control Board abused its discretion in granting a Category 3 slot machine license. In granting the Board great deference, the court held that it did not act arbitrarily and in capricious disregard of the evidence. (March 8, 2011)

In William Penn Partnership v. Saliba, the Supreme Court of Delaware addressed the "entire fairness of the transaction" doctrine in the context of a suit for breach of fiduciary duties arising out of an owners' sale of a limited liability company's sole asset. The court held that an award of attorney's fees and costs against the owners was appropriate because they failed to meet their burden of proving the entire fairness of the transaction in light of the evidence that they ignored their fiduciary duties and manipulated the sale process to their personal gain. (February 9, 2011)

In Golden Telecom, Inc. v. Global GT LP, the Supreme Court of Delaware addressed two issues regarding the valuation process in a statutory appraisal proceeding. First, the court held that the Court of Chancery must consider the "value to a stockholder of the firm as a going concern" when determining "fair value." The court is not required to give deference to the merger price. Second, the court held that a public company is not bound to previously prepared company-specific data in the statutory appraisal proceeding. (December 29, 2010)

In Bonnier Corporation v. Jersey Cape Yacht Sales, Inc., the Superior Court of New Jersey addressed whether an out-of-state corporation doing business in New Jersey needed a certificate of authority in order to bring a collection action in a New Jersey court. The court held that a certificate of authority is only needed where the corporation is engaged in intrastate commerce, which may be characterized by the maintenance of a New Jersey office and telephone number, among other factors. Because there was no evidence that plaintiff was involved in intrastate commerce, its collection action was permitted to proceed. (October 13, 2010)

In Bear Mountain Orchards, Inc. v. Mich-Kim, Inc., the United States Court of Appeals for the Third Circuit addressed when an individual may be secondarily liable for the failure of his or her corporation to preserve Perishable Agricultural Commodities Act (PACA) trust assets. The court held that an individual may be liable when 1) his or her position suggests a possible fiduciary duty to preserve the PACA trust assets; and 2) that individual's involvement in the corporation establishes that he or she was actually able to control the PACA trust assets. Because the individual at issue did not have the actual ability to control the corporation's trust assets, there was no individual liability. (October 13, 2010) 

In Morrison v. National Australia Bank Ltd., the Supreme Court of the United States issued a decision regarding §§10(b) and 20(a) of the Securities and Exchange Act of 1934 and SEC Rule 10b-5. The respondent, a foreign bank whose "ordinary shares" are not traded in the United States, purchased co-respondent, a Florida mortgage servicing company. Years later, the foreign bank had to write down the value of the Florida company's assets, causing the bank's share prices to fall. The petitioners, Australians who purchased the bank's shares before the stock fell, sued both the bank and the Florida subsidiary in federal court for violations of §§10(b) and 20(a) of the Securities and Exchange Act of 1934 and SEC Rule 10b-5. Respondents moved to dismiss for lack of subject-matter jurisdiction. The district court granted the motion, finding no jurisdiction because the domestic acts were, at most, a link in a securities fraud that took place abroad. The Second Circuit upheld the dismissal for lack of subject matter jurisdiction. The Supreme Court affirmed the judgment, but held that the Second Circuit erred in considering §10(b)'s extraterritorial reach to raise a question of subject-matter jurisdiction. The Court explained that determination of what conduct is covered by §10(b) is a substantive issue, while subject-matter jurisdiction "refers to a tribunal's power to hear a case." The Court held that the district court had jurisdiction under 15 U.S.C. §78aa to adjudicate the §10(b) question. However, the Court decided a remand was not necessary because §10(b) does not provide a cause of action to foreign plaintiffs suing foreign and American defendants for misconduct in connection with securities traded on foreign stock exchanges. (June 24, 2010)

In Petow, et al. v. Warehime, et al., the Superior Court of Pennsylvania addressed whether Pennsylvania should recognize the common benefit doctrine. Pursuant to the common benefit doctrine, attorney's fees may be awarded to individuals whose litigation has substantially benefited a class of persons not participating in the litigation. The plaintiff brought a shareholder's derivative action claiming a breach of fiduciary duty. The plaintiff alleged that, in response to his lawsuit, amendments to a corporate policy were made that saved the corporation almost $8 million. He then filed a petition for attorney's fees, which was denied. The plaintiff, appealed, arguing that the common benefit doctrine permits the recovery of attorney fees even where the fund out of which the fees are to be drawn is not within the jurisdiction of the court. The Superior Court refused to recognize the common benefit doctrine as the law in Pennsylvania, and therefore affirmed the denial of attorney's fees. (May 25, 2010) 

In Nemec v. Shrader, the Supreme Court of Delaware addressed whether retirees were permitted to bring claims against their former employer's board of directors for breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, and unjust enrichment. The plaintiffs filed their action after the board of directors exercised a contractual option to redeem the plaintiffs' stock. The plaintiffs alleged that the board acted improperly because it redeemed the stock before selling a division of company, which greatly increased the value of the stock. The court held that the retirees were not permitted to bring their claims because: 1) the implied covenant of good faith and fair dealing is only read into contracts for developments that could not be anticipated, not developments the parties did not consider; 2) the plaintiffs' fiduciary duty claims were improper because fiduciary duty claims arising out of obligations expressly addressed in contracts should be brought only as breach of contract claims; and 3) unjust enrichment claims are not permitted where the alleged wrong arises from a relationship governed by a contract. (April 6, 2010) 

In Morrison v. National Australia Bank, the United States Supreme Court granted certiorari to determine, among other things, whether the antifraud provisions of the United States securities laws extend to transnational fraud in a situation where: 1) the foreign company conducted substantial business in the United States; and 2) the claims arose from an accounting fraud perpetrated by American citizens at a Florida-based subsidiary of the foreign company and were merely reported from overseas in the parent company's financial statements. The Court will also decide whether subject matter jurisdiction extends to claims involving transnational securities fraud. (November 30, 2009)

In Rendell, Governor of PA v. PA State Ethics Commission, the Supreme Court of Pennsylvania addressed whether non-profit corporations are included within the term "business" as defined in Pennsylvania's Public Official and Employee Ethics Act (Ethics Act). The Commonwealth Court held that the definition of the term "business" in § 1102 of the Ethics Act did not include non-profit corporations. The Supreme Court reversed, holding that non-profit corporations are included in the Ethics Act's definition of the term "business." In reaching its decision, the court stated that the Ethics Act needs to be liberally construed in order to prevent public officials from engaging in conduct that constitutes a conflict of interest. (November 30, 2009)

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