Articles Posted in Business Law

Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor. The Fifth Circuit affirmed the bankruptcy court's dismissal of the bankruptcy petition as unauthorized. The court held that, under these circumstances, the issue of corporate authority to file a bankruptcy petition was left to state law. In this case, the debtor was a Delaware corporation, governed by that state's General Corporation Law, and the court found nothing that would nullify the shareholder's right to vote against the bankruptcy petition. View "Franchise Services of North America, Inc. v. United States Trustee" on Justia Law

Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor. The Fifth Circuit affirmed the bankruptcy court's dismissal of the bankruptcy petition as unauthorized. The court held that, under these circumstances, the issue of corporate authority to file a bankruptcy petition was left to state law. In this case, the debtor was a Delaware corporation, governed by that state's General Corporation Law, and the court found nothing that would nullify the shareholder's right to vote against the bankruptcy petition. View "Franchise Services of North America, Inc. v. United States Trustee" on Justia Law

The Fifth Circuit affirmed the district court's grant of judgment as a matter of law to defendants, concluding that federal law preempted ThermoTek's unfair competition claim and that ThermoTek failed to prove its damages for fraud. ThermoTek designs, manufacturers, and sells the VascuTherm system, which consists of a medical device and specially designed wraps that provide thermal and compression therapy. The court held that the district court did not abuse its discretion in reaching the preemption defense on the merits. On the merits, the court held that federal copyright and patent laws preempted the unfair-competition-by-misappropriation claim. View "Motion Medical Technologies, LLC v. Thermotek, Inc." on Justia Law

The Fifth Circuit affirmed the district court's decision to enjoin state court civil proceedings until the conclusion of the government's criminal investigation, or for a period of one year, whichever first occurred. The court held that the district court had authority to enjoin the state court proceedings where the general prohibition against federal courts granting injunctions to stay state court proceedings did not apply when the United States, as here, seeks the injunction. The company in this case was pursuing a civil lawsuit in state court seeking, among other things, return or ownership of electronic devices currently held by federal investigators. If not enjoined, further proceedings in state court, including civil discovery, could undermine the federal criminal investigation into the company. View "In re: Grand Jury Subpoena" on Justia Law

Claimants appealed the denial of civil claims under the Settlement Program that was established following the Deepwater Horizon oil spill. Claimants submitted Individual Economic Loss (IEL) claims for lost wages as employees of their architectural firm. The firm had already received a Business and Economic Loss (BEL) award under the Settlement Program. The Fifth Circuit held that the BEL framework, by compensating the business for the owners' lost wages through the fixed-cost designation of their wages, precluded compensating those same owners for the same wages through an IEL claim. Because the Settlement Program did not contemplate the requested compensation, the court affirmed the judgment. View "In Re: Deepwater Horizon" on Justia Law

ASARCO filed suit against MRI, challenging MRI's refusal to bring ASARCO back into a partnership in a Montana copper mine. MRI argued that ASARCO's decisions during its Chapter 11 bankruptcy filing prevent it from suing for reinstatement. The Fifth Circuit affirmed the district court's denial of MRI's motion for summary judgment on preclusion and estoppel grounds. The court held that the district court correctly determined that ASARCO was not precluded from bringing its breach of contract claim and the claim was not barred by res judicata. The court explained that the claim was contingent on future events and thus ASARCO could not have brought it during the adversary proceeding. The court also held that ASARCO's disclosure of the right to reinstate, though scant, was sufficient. Finally, the court left it to the district court to decide in the first instance the nature of the provision and whether, if it is executory, the ride-through doctrine applies. View "ASARCO v. Montana Resources" on Justia Law

The Fifth Circuit affirmed the district court's order holding Crystal and two of its officers jointly and severally liable for a payment that Crystal received pursuant to the BP settlement. The district court granted a clawback motion without a hearing, holding that there was no genuine dispute of material fact that Crystal was a failed business under the terms of the settlement agreement and that Crystal's sworn statement to the contrary constituted fraud. The Fifth Circuit held that there was no genuine dispute of material fact that Crystal materially misrepresented itself as an ongoing business when it filed its claim in 2012; Crystal either knew or should have known that it was a failed business when it filed its claim in 2012; and Crystal lacked standing to champion the rights of its officers because they have not sought to appeal the judgment of the district court and because Crystal failed to identify a genuine obstacle preventing the officers from filing their own appeal. View "In Re: Deepwater Horizon" on Justia Law

The court-appointed receiver of the Stanford entities filed suit alleging that six transfers from SCB to Dillon Gage were fraudulent transfers under the Texas Uniform Fraudulent Transfer Act (TUFTA), Tex Bus. & Com. Code 24.005(a)(1), and should be returned to receivership. The jury found that the transfers were not fraudulent. The district court subsequently denied Dillon Gage attorney's fees. Both parties appealed. The Fifth Circuit concluded that the jury reasonably could have found that SCB could have raised sufficient capital to pay Dillon Gage to complete the Gallery Deal without using new customers' money; the jury was not required to find that SCB was insolvent at the time of the transfers; and, viewing both the direct and circumstantial evidence of fraud as a whole, a rational jury could have found that SCB did not act with fraudulent intent. The Fifth Circuit rejected the receiver's four challenges to the jury instructions and concluded that they were without merit, and held that the district court did not apply the wrong standard in assessing Dillon Gage's fee request. Accordingly, the Fifth Circuit affirmed the jury verdict and order denying attorney's fees. View "Janvey v. Dillon Gage Inc. of Dallas" on Justia Law

Jacked Up and Sara Lee signed a licensing agreement whereby Sara Lee would produce and sell energy drinks developed by Jacked Up. Sara Lee sold its beverage division to the J.M. Smucker Company and Smucker decided not to assume Sara Lee's licensing agreement. After Sara Lee formally terminated the agreement, Jacked Up filed suit against Sara Lee, alleging breach of contract, breach of fiduciary duty, fraud, and fraudulent inducement. Jacked Up joined claims against Smucker for, among other things, tortious interference with a contract and trade secret misappropriation. The district court granted summary judgment against Jacked Up on all claims. In regard to claims against Sara Lee, the court reversed the district court's conclusion that Section 14(b) of the agreement unambiguously permitted Sara Lee to terminate the licensing agreement at will; there are genuine disputes about whether Sara Lee breached the contract and whether Jacked Up performed under the contract, and thus the court reversed the grant of summary judgment in favor of Sara Lee on Jacked Up's breach of contract claim; the court affirmed as to the breach of fiduciary claim because Jacked Up failed to point to sufficient evidence that would support finding a fiduciary relationship between the parties; the court reversed as to the fraud and fraudulent inducement claim because, at the very least, there is a genuine dispute of fact as to whether Jacked Up's reliance on Sara Lee's representations was justifiable. In regard to claims against Smucker, the court affirmed summary judgment in favor of Smucker on the tortious interference claim; affirmed as to the trade secret misappropriation claim; affirmed the denial of Jacked Up's Rule 56(d) motion for a continuance; and the court left it to the district court to determine whether Jacked Up has put forth sufficient evidence of damages. View "Jacked Up, LLC v. Sara Lee Corp." on Justia Law

Plaintiffs, shareholders of ATP, filed a securities class action concerning ATP's collapse into bankruptcy. Plaintiffs alleged that defendants, each of whom was an officer or director of ATP, misrepresented the production of Well 941 #4, ATP's liquidity and whether the company had the available funds to complete the Clipper pipeline, and the true reason that Matt McCarroll resigned as CEO of ATP. The district court dismissed plaintiffs' Second Amended Complaint with prejudice. The court concluded that, viewing plaintiffs' allegations as a whole, plaintiffs failed adequately to allege scienter with regard to Defendant Reese's statements; plaintiffs' allegations of scienter as to ATP's liquidity and the Clipper project failed as a matter of law; and there was no basis for the court to conclude that Defendants Bulmahn and Reese knew or were reckless in not knowing McCarroll's true reasons for resigning. Accordingly, the court affirmed the judgment. View "Neiman v. Bulmahn" on Justia Law