Justia Civil Procedure Opinion Summaries

The case centers on a dispute involving a pharmaceutical company founded by the plaintiff, who also served as its CEO. The plaintiff obtained investment from a Canadian entity controlled by one of the defendants, who later became a director. The company entered into a profitable licensing agreement for a drug, and the plaintiff claims he was personally entitled to 30% of the profits based on an oral agreement. The investor and his affiliates, however, allege that the plaintiff wrongfully diverted corporate assets by taking this share. After disagreements arose, the investor replaced himself and another director on the board with officers from his own affiliates, who began investigating the alleged diversion. In response, the plaintiff initiated litigation, asserting that the investigation was a breach of fiduciary duty and that the investor and his affiliates acted in bad faith for their own benefit.Previously, the Court of Chancery of the State of Delaware was asked to consider several claims, including breach of fiduciary duty, civil conspiracy, and tortious interference against the investor, his affiliates, and the two new directors. The investor’s affiliate moved to dismiss for lack of personal jurisdiction, and the court found it had no jurisdiction over the affiliate. The court also examined whether it had jurisdiction over the investor for claims other than those related to his service as a director, finding it did not because the complaint failed to state a viable claim against him in that capacity.In the present decision, the Court of Chancery held that it lacked personal jurisdiction over the investor’s affiliate and over the investor in his non-director capacities, dismissing those claims without prejudice. The court further dismissed with prejudice the breach of fiduciary duty and conspiracy claims against the directors and the investor in his director capacity, finding no viable claims were stated. However, the court allowed the plaintiff’s claim for a declaratory judgment regarding his right to the profits from the drug to proceed against the company, provided an amended complaint is filed naming the company as a proper defendant. View "MacLaughlan v. Einheiber" on Justia Law

A long-time authorized equipment dealer, operating under two dealer sales agreements with a manufacturer, received notice in September 2024 that its agreements would be terminated in ninety days. The manufacturer cited alleged false and misleading statements, including altered business records, as grounds for termination under the agreements. The dealer responded by challenging the termination in court, invoking North Dakota statutes that regulate equipment dealer terminations and asserting that the filing of its action triggered an automatic stay against termination during litigation.The District Court of Morton County was asked by the manufacturer to dissolve or modify the automatic stay, arguing that the statutory stay only applied to certain products and not to the bulk of equipment covered by the agreements. The manufacturer presented evidence and legislative history to support its position. However, the district court denied the motion, holding that the statute mandates a procedural automatic stay upon the filing of the dealer’s action, and that the court lacked authority to dissolve or modify the stay at this stage. The court deferred any determination of which products were covered by which statute to later proceedings. The manufacturer then sought appellate review, but the district court did not rule on its request for certification under N.D.R.Civ.P. 54(b) due to the pending appeal.The Supreme Court of the State of North Dakota reviewed whether it had jurisdiction over the appeal. The court concluded that, although the automatic stay functioned as a statutory temporary injunction making the order appealable under N.D.C.C. § 28-27-02(3), the absence of Rule 54(b) certification rendered the order not appealable at this stage. The Supreme Court dismissed the appeal and, finding no extraordinary circumstances or public interest, declined to exercise its supervisory jurisdiction. View "Bobcat of Mandan v. Doosan Bobcat North America" on Justia Law

Four brothers who had previously formed a diamond partnership later entered into an oral agreement in 1995 with a fifth brother to create a separate real estate partnership. The agreement was never reduced to writing, consistent with family custom. Over several years, the brothers jointly acquired and managed a large portfolio of California real estate. Tensions arose after the original real estate owner repaid a loan that was a condition for his partnership interest. One brother, who controlled the partnership’s entities, began excluding the others and denied the existence of any partnership, asserting sole ownership over the assets.The litigation began in 2003 when the excluded brother sued his siblings and related entities for his partnership share and damages. Two other brothers, who initially disclaimed the partnership under alleged economic coercion, later filed cross-complaints for their shares in both the diamond and real estate partnerships. The case saw multiple prior appeals and writ proceedings. After the trial court initially granted summary adjudication against the main plaintiff on most claims, the California Court of Appeal reversed, allowing contract, fiduciary duty, and fraud claims to proceed. Further cross-complaints were filed by the brothers, which survived demurrer on statute of limitations grounds.In 2024, after a lengthy jury trial, the Superior Court of Los Angeles County entered judgment in favor of the three plaintiff brothers, awarding declaratory relief, partnership shares, compensatory and punitive damages, and prejudgment interest totaling about $6.85 billion against the controlling brother and the partnership entities. On appeal, the California Court of Appeal, Second Appellate District, Division One, rejected most challenges to the trial court’s evidentiary rulings and instructions, but held the court erred in admitting an undisclosed expert opinion concerning lost investment profits. The appellate court conditionally affirmed the judgment, ordering a reduction of the economic damages awards relating to the real estate partnership by amounts attributable to this opinion, unless the plaintiffs opt for a new trial on those damages and related punitive damages. The judgments were otherwise affirmed. View "Jogani v. Jogani" on Justia Law

Two homeowners brought suit against their homeowners' association and its board members, claiming improper use of dues, unlawful sale of a storage unit, failure to hold proper meetings, and allowance of illegal activities on the premises. The plaintiffs communicated concerns to the board and demanded relevant documents, but ultimately filed a lawsuit soon after sending a demand that the board bring suit against certain directors. They later amended the petition to add an additional defendant. The board had responded to some allegations, including rescinding the contested sale and scheduling meetings, but plaintiffs argued the board failed to investigate or act in good faith.The Oklahoma County District Court granted summary judgment to all defendants. The court found that plaintiffs’ affidavits lacked evidentiary support and that the brief interval between the plaintiffs’ pre-suit demand and the filing of the lawsuit did not allow the board enough time to investigate and make a good faith decision. The district court also determined that plaintiffs had failed to meet their burden of proving the board breached fiduciary duties and did not make a pre-suit demand regarding one defendant. The Court of Civil Appeals affirmed, holding that the demand requirement was not met and that the business judgment rule protected the board's decisions.The Supreme Court of the State of Oklahoma granted certiorari and reviewed the case de novo. The Court vacated the opinion of the Court of Civil Appeals but affirmed the district court’s judgment. The Court held that plaintiffs’ pre-suit demand did not provide a reasonable time for the board to investigate, as required for a shareholder derivative claim. The Court also found plaintiffs failed to rebut the business judgment rule and did not provide material facts warranting trial. Thus, summary judgment for defendants was affirmed. View "HOWARD v. THE BARRINGTON HOMEOWNERS" on Justia Law

Plaintiffs, who provided subadvisory investment services and loaned $1.5 million to FolioMetrix (personally guaranteed by two individuals), later engaged with defendants involved in a proposed merger of investment firms. Plaintiffs alleged that during merger negotiations, defendant Putnam promised to relieve the original borrowers of their obligations and personally assume the debt. Subsequent communications referenced intentions to transfer the loan liability to the new entity, but when plaintiffs sought a formal promissory note, defendants refused. Ultimately, defendants did not repay any portion of the loan.Plaintiffs filed suit in the Superior Court of the City and County of San Francisco in March 2019, alleging breach of contract, fraud, negligent misrepresentation, and breach of the covenant of good faith and fair dealing. At trial, the central dispute was whether defendants had agreed to assume the loan obligations under the promissory note. Plaintiffs argued that the agreement was formed through emails and conduct, while defendants denied any assumption of liability. The jury found in favor of defendants, determining no contract was formed and no promise was made to repay the loans. Following trial, the court awarded defendants attorney fees under Civil Code section 1717, based on a fee provision in the original promissory note, after reducing the requested amount.On appeal, the California Court of Appeal, First Appellate District, Division Five, addressed several issues. It ruled that the automatic bankruptcy stay did not preclude resolution of the appeal because the debtor (NAI) was the plaintiff rather than a defendant. The court rejected plaintiffs’ claims of error regarding jury instructions on contract formation, finding insufficient argument and no prejudice. It affirmed the attorney fee award, concluding the action was “on the contract” containing the fee provision, and held the fee amount was within the trial court’s discretion. The judgment and fee order were affirmed. View "Navellier v. Putnam" on Justia Law

A stockholder derivative suit was filed alleging that Tesla’s non-employee directors, with the approval of Elon Musk, breached their fiduciary duties by granting themselves excessive stock option compensation between 2017 and 2020. After discovery and mediation, the parties reached a settlement. Under its terms, the directors agreed to return to Tesla a mix of cash, stock, and unexercised stock options, and to forgo future compensation for certain years. The settlement also included various corporate governance reforms.The Court of Chancery of the State of Delaware approved the settlement, rejecting an objector’s arguments regarding the fairness and structure of director contributions and the binding nature of future stockholder approval votes for director compensation. The court valued the benefit to Tesla using the intrinsic value (“in the money” value) of the returned options, along with returned cash and stock, and awarded attorneys’ fees as a percentage of the calculated benefit. Tesla objected to the fee award, arguing that the value of the returned options to the company was far less than their intrinsic value and should instead be measured by the grant date fair value (GDFV), which reflects the accounting benefit to Tesla.The Supreme Court of the State of Delaware affirmed the approval of the settlement but reversed the method used to calculate the attorneys’ fee award. It held that the intrinsic value of the cancelled options should not have been included in determining the monetary benefit to Tesla for purposes of a common fund fee calculation. The Court concluded that, in derivative litigation, unless an investor-level benefit falls within a recognized exception, the benefit to the corporation is controlling. The Supreme Court modified the fee award to reflect only the actual corporate benefit and remanded for any further disputes regarding fees. View "IN RE TESLA, INC. DIRECTOR COMPENSATION STOCKHOLDER LITIGATION" on Justia Law

The State of Ohio brought a lawsuit in state court against several pharmacy benefit managers (PBMs) and related entities, alleging they conspired to artificially inflate prescription drug prices in violation of Ohio law. Ohio claimed that the PBMs, acting as intermediaries between drug manufacturers and health plans, negotiated rebates and fees in a manner that increased drug list prices and extracted payments from pharmacies, harming consumers and violating state antitrust and consumer protection statutes. The PBMs provided services to both private clients and federal health plans, including those for federal employees and military personnel.The defendants, Express Scripts and Prime Therapeutics, removed the case to the United States District Court for the Southern District of Ohio under the federal officer removal statute, arguing that their negotiations on drug prices were conducted on behalf of both federal and non-federal clients in a unified process subject to federal oversight. Ohio moved to remand the case to state court, asserting that its claims did not target conduct directed by federal officers and disclaimed any challenge to the administration of federal health programs like FEHBA or TRICARE. The district court accepted Ohio’s disclaimer and determined that the complaint did not impose liability for acts under federal direction, granting Ohio’s motion to remand.On appeal, the United States Court of Appeals for the Sixth Circuit reviewed the matter de novo. The court held that the PBMs were “persons acting under” federal officers because their negotiations were performed under detailed federal supervision and regulation for federal health plans. The court further found that the complaint related to acts under color of federal office, as the alleged wrongful conduct was inseparable from federally directed negotiations. The court also determined that the PBMs raised colorable federal defenses based on federal preemption. Consequently, the Sixth Circuit reversed the district court’s remand order and remanded the case for further proceedings in federal court. View "Ohio ex rel. Yost v. Ascent Health Services, LLC" on Justia Law

An investor brought a derivative action against the managers of a limited liability company, alleging unauthorized transactions conducted under their management. After a bench trial, the investor lost both at trial and on appeal. The investor’s claims were rejected, and the court awarded costs to the prevailing manager. Although both managers were originally involved in the case, only one remained relevant for the cost award proceedings at this stage.Following the trial and appellate losses, the Superior Court of Los Angeles County awarded costs to the prevailing manager under Code of Civil Procedure section 1032 and California Rules of Court, rule 8.891, which together provide that a prevailing party is generally entitled to recover costs. The plaintiff had previously defeated the manager’s motion for a security bond under Corporations Code section 17709.02, a statute intended to deter frivolous derivative suits. The plaintiff argued that this earlier success on the bond motion should bar any subsequent award of costs, claiming that section 17709.02 overrides the ordinary cost rules.The California Court of Appeal, Second Appellate District, Division Eight, reviewed this argument. The appellate court held that Corporations Code section 17709.02 does not preclude an award of ordinary litigation costs to a prevailing defendant in a derivative action where the bond motion was denied. The court found no statutory language supporting the plaintiff’s position and noted that case law, including Brusso v. Running Springs Country Club, Inc., confirms that the bond statute is special-purpose and does not displace general cost-recovery rules. The appellate court affirmed the Superior Court’s judgment, awarding costs to the prevailing defendant. The court also found that the plaintiff had forfeited several additional arguments by failing to support them with adequate briefing or legal authority. View "Barrios v. Chraghchian" on Justia Law

LJM Partners, Ltd. and Two Roads Shared Trust, both involved in options trading on the Chicago Mercantile Exchange, experienced catastrophic losses on February 5 and 6, 2018, when volatility in the S&P 500 surged unexpectedly; LJM lost approximately 86.5% of its managed assets and the Preservation Fund (managed by Two Roads) lost around 80%. The plaintiffs alleged that eight defendant firms, acting as market makers, manipulated the VIX index by submitting inflated bid-ask quotes for certain SPX Options, which artificially raised volatility and resulted in inflated prices on the plaintiffs' trades, causing over one billion dollars in combined losses.After initially filing complaints against unnamed "John Doe" defendants in the United States District Court for the Northern District of Illinois, the plaintiffs pursued extensive discovery to identify the responsible parties. The cases were swept into a multidistrict litigation proceeding (VIX MDL), which delayed discovery. Eventually, after several rounds of amended complaints, the plaintiffs identified and named eight defendant firms. The defendants moved to dismiss. The district court found that LJM lacked Article III standing because it failed to allege an injury in fact, as the losses belonged to its clients, not LJM itself. For Two Roads, the district court held that its claims were time-barred under the Commodity Exchange Act’s two-year statute of limitations, and equitable tolling was denied due to lack of diligence.The United States Court of Appeals for the Seventh Circuit affirmed the district court’s judgment. It held that LJM’s complaint failed to establish Article III standing, as it did not allege that LJM itself—not just its clients—suffered actual losses. The court further held that Two Roads’s complaint was untimely and that the district court did not abuse its discretion in refusing equitable tolling. Both dismissals were affirmed. View "LJM Partners, Ltd. v. Barclays Capital, Inc." on Justia Law

Several senior financial advisors resigned from a national investment advisory firm’s Des Moines branch to join a competitor that was opening a new local office. After their departure, nearly all remaining advisors at the branch also resigned en masse and joined the competitor, which offered substantial incentives. The resignations occurred despite restrictive covenants in the former advisors’ employment contracts, which limited their ability to solicit clients, disclose confidential information, and recruit other employees. The competitor and the departing advisors soon began servicing many of their former clients, resulting in a substantial loss of business for their previous employer.Following these events, the original firm filed suit in the United States District Court for the Southern District of Iowa, alleging breach of contract, tortious interference, and theft of trade secrets. The district court initially denied a temporary restraining order but later granted a broad preliminary injunction. This injunction prohibited the former advisors from servicing or soliciting covered clients, using confidential information, or recruiting employees, and it barred the competitor from using confidential information or interfering with employment agreements. The defendants sought a stay but were denied by both the district court and the appellate court.On appeal, the United States Court of Appeals for the Eighth Circuit reviewed the preliminary injunction. The appellate court determined that the record did not show a likelihood of irreparable harm that could not be compensated by money damages, as required for preliminary injunctive relief. The court found that the alleged financial harms were calculable and that the claimed destruction of the Des Moines branch had already occurred, rendering injunctive relief ineffective for preventing future harm. The Eighth Circuit therefore vacated the preliminary injunction and remanded the case for further proceedings. View "Choreo, LLC v. Lors" on Justia Law