Fifth Circuit: Ledford v. Keen, et al

 

The claim that the directors of the rodeo corporation had run the corporation as a sham and therefore that the plaintiff was entitled to equitable tolling when adding the directors to her claim adequately stated a claim for relief, but under governing state law, undercapitalization alone is insufficient to establish that the corporation was a liability shell subject to veil-piercing.

https://www.ca5.uscourts.gov/opinions/pub/20/20-50650-CV0.pdf

Seventh Circuit: Stanley Boim v. American Muslims for Palestine

 

A federal court has sufficient independent jurisdiction over a claim to enforce an earlier federal judgment against a putative alter ego of the original deft when jurisdiction over the putative alter ego would arise under the statute that conferred the jurisdiction over the original action.  The question of whether the second organization is in fact an alter ego of the first is a merits question, not a jurisdictional threshold.

The ERISA framework is not compulsory when assessing alter ego under the antiterrorism laws.

http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2021/D08-16/C:20-3233:J:Scudder:aut:T:fnOp:N:2748362:S:0

DC Circuit: BCP Trading and Investments, LLC v. Cmsnr. IRS

 

Investigation of accountancy firm did not create a situation of undue contractual influence on the taxpayers, as some had multiple advisors, and some were sophisticated business professionals; the accountancy firm notified the taxpayers of the investigation in a manner that allowed for outside advice on at least some of the relevant transactions.

For purposes of determining whether the partnership was a sham, while the correct business purpose test is distinct from the court's intent-based test, the two are not mutually exclusive, since intent is necessary to prove business purpose.  The transaction had no practical economic effects other than the creation of intentional artificial tax losses.

Tax court's refusal to allow intervenor is reviewed for clear abuse of discretion, given the broad FRCP rule and the court's procedural discretion.  Denial of intervention of right or denial of permissive intervention would both have been appropriate, given the existing representation of interests.

BCP Trading and Investments, LLC v. Cmsnr. IRS

Fifth Circuit: Thomas Martone v. Walter Robb, III, et al

Plaintiff need not sell stock to establish loss causation for standing -- purchase at inflated price and holding at reduced value suffices for particular injury.

Where there was no alternative that would have avoided the fall in stock price, the allegedly harmful timing of the disclosure might have been a legitimate business decision.  ANy hedging strategy would, as a matter of law, have required disclosure.  Additionally, the board could no have been certain that the employee stock plan would be a net purchaser during the period under consideration.


http://www.ca5.uscourts.gov/opinions/pub/17/17-50702-CV0.pdf

Seventh Circuit: Elliott Levin v. William Miller

Corporate officers had no obligation to counsel the board on the wisdom of not disbursing the tax refunds to the soon-to-fail banks, given the stated board policy of support for the banks.

http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2018/D08-17/C:17-1775:J:Sykes:aut:T:fnOp:N:2203966:S:0

Fifth Circuit: City of Pontiac Gen Empl Retmn v. Vinit Asar, et al.

Statement admitted into evidence from the company's Audit Commission report was not impermissible group pleading, as it was admitted not for the statements asserted, but rather to establish what the committee members knew.

 Statements by corporate leadership don't establish a strong inference of scienter, as the allegations do not set out the precise statements, and there is no indication that the fraud went from the top down, as opposed to from the bottom up.

Audit committee's description of historical accounting practices raises sufficiently strong inference of scienter as to accounting leaderships' role in improperly enhancing financials reporting.

Sarbanes-Oxley filings evince improprieties, but none so glaring that being unaware of them would amount to reckless behavior.

&c, &c.

http://www.ca5.uscourts.gov/opinions/pub/17/17-50162-CV0.pdf

Third Circuit: Clientron Corp v. Devon IT Inc

As there was no showing that the misconduct benefited the defendants personally, District Court was correct in not piercing the corporate veil on a theory of sham, as corporate formalities should be considered differently with respect to closely held or family corporations.

 As the discovery sanction against one spouse, holding that a corporation held by a tenancy by the entirety was in fact an alter ego, created a split between federal substantive law for the discovery sanction and state substantive law for the co-tenant by the entirety, it was an abuse of discretion.  Under state law, both who hold by a tenancy of the entirety are presumed to act for the benefit of the marriage.

http://www2.ca3.uscourts.gov/opinarch/163432p.pdf

DC Circuit: EIG Energy Fund XIV, L.P. v. Petroleo Brasileiro, S.A.

The domestic effects of the scheme were sufficient for jurisdiction under FISA, as damages were incurred before the foreign investors withdrew (which might have attenuated the causation), and the foreign locus of the investment vehicles used by the domestic investors does not preclude a finding of direct effects on the domestic investors.

https://www.cadc.uscourts.gov/internet/opinions.nsf/D7C9FB5343E0C109852582BF005095DA/$file/17-7067-1738941.pdf

DC Circuit: Ho-Chunk, Inc. v. Jeff Sessions

Corporations incorporated under tribal law and wholly owned by the tribe are subject to the tobacco recordkeeping laws, as the reservations are within the states, and the act does not base its jurisdiction on a territorial determination.

Tribes and tribal instrumentalities are persons, given the Definitions Act.

https://www.cadc.uscourts.gov/internet/opinions.nsf/A1C437A21B393451852582BF005095BB/$file/17-5140-1738923.pdf

First Circuit: MAZ Partners LP v. Shear

Under state law, a non-majority shareholder director can be said to hold a controlling interest in the corporation when he or she evinces actual control of the company; control of a class of shares with the power to block corporate actions, the power to appoint directors, and actual control of past transactions are among the indicia of control.

Outside of closely held corporations, shareholder ratification isn't a safe-harbor against a basic fairness inquiry, given the way that the statute is written.

As the intent of the statute is to reverse the common-law presumption of voidability for interested transactions, it does not legitimate shifting the burden to the plaintiff in cases of ratified transactions when the plaintiff is not seeking to void the deal.

Breach of fiduciary duty sounds in equity, so disgorgement is an appropriate remedy; the court did not abuse its discretion in allotting the windfall to the wronged party.

Declining curative instruction as to evidence admitted presents virtually insuperable bar to raising the claim on appeal.

Wilkes Booth given his cue at 16, Polonius pops up at 21.

http://media.ca1.uscourts.gov/pdf.opinions/17-1821P-01A.pdf

Fifth Circuit: Franchise Svc of North America v. United States Trustee

As shareholder rights under the corporate charter are a matter of state law and the power of a corporation to invoke bankruptcy protection arises from local law, the federal public policy interest in assuring the bankruptcy proceeding does not preclude a shareholder from blocking the bankruptcy filing where that shareholder is also a creditor, so long as there is no evidence of bad faith in the acquisition of the blocking shareholder rights.

Whether the acquisition of such rights under the charter violates state law is not before the court, as the parties don't raise it here.

Simple acquisition of a controlling interest in a stock class is insufficient proof of corporate control for purposes of judging breach of fiduciary duty; blocking the filing is not per se proof of such control.

http://www.ca5.uscourts.gov/opinions/pub/18/18-60093-CV0.pdf

Ninth Circuit: Clifford Tindall v. First Solar Inc.

Where FRCP indicates abuse of discretion review, but the dismissal for not stating a claim would usually prompt de novo, circuit precedent compels a three-judge panel to review the claim for abuse of discretion.

Under Delaware law, the Board's role in financial disclosures and press releases is not a business judgment for the purposes of assessing demand futility, since the releases and disclosures are snapshots of past business decisions.  The correct test looks to general oversight.

Where a court denies leave to amend in a situation where it is usually granted absent prejudice, but the rule merely permits granting for good cause, there is no need to cite or discuss the rule, so long as there is no abuse of discretion of the good cause standard.

http://cdn.ca9.uscourts.gov/datastore/opinions/2018/06/13/17-15185.pdf

Fifth Circuit: Judy Hunter, et al v. Berkshire Hathaway, Inc., et

ERISA


Although general amendment provision of Plan allowed repeal of provisions prohibiting reductions in benefits, the acquiring company was bound by the terms of the merger, and is therefore barred from causing the acquired company to make (some of?) the amendments at issue.


Judy Hunter, et al v. Berkshire Hathaway, Inc., et

Second Circuit: U.S. v. Gabinskaya

Corporations, Fraud, Conspiracy, Insurance


In state litigation involving no-fault insurance, courts may look beyond the formal indicia of ownership when attempting to determine whether a corporation has been fraudulently incorporated.

Testimony relating to the conspirators' legal advice doesn't speak to knowing participation in the scheme.


U.S. v. Gabinskaya

Second Circuit: Alphonse Hotel Corporation v. Tran

FRCP, Corporations, Contracts, Choice of Law, Certified Question


No abuse of discretion in denial of discovery that was seeking to determine valuation of the property at issue where the lease was peppercorn.

Under state law, lease to family member is not accorded deference as business judgment where the corporation has been run for the benefit of the family.

Sweat equity consideration was prior to the lease,and therefore could not be consideration for the deal.

 Under second state's law, which binds by consent of parties due to primary state law's choice of law rules, a contract void for lack of consideration may nonetheless under the parol evidence rule preclude the court from recognizing an earlier agreement between the parties.

Question is one of first impression in the second state, but not important enough to certify, given the certification rules of the second state.



Alphonse Hotel Corporation v. Tran 

DC Circuit: USA v. TDC Management Corporation

Corporations, FDCPA


Husband and wife's holding of stock in an S-corporation as tenants by the entirety doesn't support an FDCPA action against the assets of the corporation. 

Remanded to consider whether to pierce the veil.


USA v. TDC Management Corporation

Seventh Circuit: Board of Trustees of the Autom v. Full Circle Group, Inc.

Posner, Successor liability

Where a sophisticated buyer acquires a company and there is a genuine issue of continuity of business, the hypothetical nature of a funded pension liability exit payment at the time of acquisition is not sufficient for summary judgment for lack of liability.

Alter ego liability requires fraud.  Probably.


Board of Trustees of the Autom v.   Full Circle Group, Inc.

Tenth Circuit: Pikk v. Pedersen

Corporations, Board Law


To state a claim, suit relying on futility exception must plead facts that establish that directors faced a substantial risk of liability under state statute.

Intentionality requirement implies knowledge of wrongfulness. 

Lack of independence not proven

Pikk v. Pedersen