Justia Civil Procedure Opinion Summaries

In this case, the plaintiff, a Chapter 11 Trustee for BK Racing, LLC, initiated an adversary proceeding against multiple defendants, including Ronald and Brenda Devine, various family trusts, and corporate entities. The defendants were accused of obstructing the bankruptcy process by failing to comply with discovery obligations, including not producing required financial documents and records, despite multiple court orders.The bankruptcy court found that the defendants willfully disregarded their discovery obligations and engaged in a pattern of obstruction and delay. As a result, the court entered a default judgment against the defendants as a discovery sanction, awarding the plaintiff $31,094,099.89. The district court affirmed this decision, noting the defendants' repeated noncompliance and the necessity of deterrence.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court upheld the lower courts' decisions, finding no abuse of discretion in the entry of default judgment. The court applied the Wilson factors, determining that the defendants acted in bad faith, caused significant prejudice to the plaintiff, necessitated deterrence, and that lesser sanctions would be ineffective. The court also affirmed the decision to pierce the corporate veil, holding the defendants jointly and severally liable, based on evidence that the corporate entities were mere instrumentalities of the Devines, lacking proper corporate formalities and used to siphon funds.The Fourth Circuit concluded that the bankruptcy court's findings were not clearly erroneous and that the default judgment and the amount awarded were appropriate given the defendants' egregious conduct. The decision of the district court was affirmed. View "Smith v. Devine" on Justia Law

Plaintiffs, ParaFi Digital Opportunities LP, Framework Ventures, L.P., and 1kx LP, invested in Curve, a decentralized cryptocurrency trading platform developed by Mikhail Egorov. They allege that Egorov fraudulently induced them to invest by making false promises about their stake in Curve and then canceled their investment, leading to claims of fraud, conversion, and statutory violations. Egorov, who developed Curve while living in Washington and later moved to Switzerland, formed Swiss Stake GmbH to manage Curve. The investment agreements included Swiss law and forum selection clauses.The San Francisco County Superior Court granted Egorov’s motion to quash for lack of personal jurisdiction, finding that Egorov did not purposefully avail himself of California’s benefits. The court noted that the plaintiffs initiated contact and negotiations, and the agreements specified Swiss jurisdiction. The court also denied plaintiffs’ request for jurisdictional discovery, concluding that plaintiffs did not demonstrate that discovery would likely produce evidence establishing jurisdiction.The California Court of Appeal, First Appellate District, Division Two, affirmed the lower court’s decision. The appellate court agreed that Egorov’s contacts with California were insufficient to establish specific jurisdiction, as the plaintiffs had solicited the investment and Egorov had not directed any activities toward California. The court emphasized that the plaintiffs’ unilateral actions could not establish jurisdiction and that the agreements’ Swiss law and forum selection clauses further supported the lack of jurisdiction. The court also upheld the denial of jurisdictional discovery, finding no abuse of discretion by the trial court. View "ParaFi Digital Opportunities v. Egorov" on Justia Law

Innovative Waste Management (IWM) entered into a joint venture with Dunhill Products in 2009 and 2010, which led to allegations of breach of contract, fraud, and misappropriation of trade secrets. IWM accused Dunhill Products, Crest Energy Partners, and Henry Wuertz of stealing trade secrets, interfering with business relationships, and theft of petroleum products. IWM sought $12 million in economic damages and punitive damages. The defendants responded with affirmative defenses and counterclaims. IWM served discovery requests in 2012, but the defendants failed to comply, leading to multiple motions to compel and sanctions.The Circuit Court of Dorchester County found the defendants in contempt for violating discovery orders and sanctioned them by striking their answer and counterclaims. The defendants appealed to the South Carolina Court of Appeals, which affirmed the circuit court's decision in an unpublished opinion. The defendants then sought review by the South Carolina Supreme Court.The South Carolina Supreme Court reviewed whether the Court of Appeals erred in finding that the defendants waived review of the trial court's interlocutory discovery orders and whether the circuit court abused its discretion by striking the defendants' pleadings. The Supreme Court agreed with the Court of Appeals, holding that the defendants waived their right to review the discovery orders by not complying with them and that the circuit court did not abuse its discretion in striking the pleadings due to the defendants' deliberate pattern of discovery abuse. The Supreme Court affirmed the decision of the Court of Appeals. View "Innovative Waste Management, Inc. v. Crest Energy Partners GP, LLC" on Justia Law

Frank Harmon Black and his securities investment firm, Southeast Investments, N.C., Inc., are involved in an ongoing disciplinary proceeding initiated by the Financial Industry Regulatory Authority, Inc. (FINRA) in September 2015. The proceedings were based on allegations that Black and Southeast failed to establish and maintain an adequate broker supervisory system, failed to preserve business-related electronic correspondence, and submitted false documents and testimony to FINRA examiners, violating FINRA rules and federal securities laws. In March 2017, a FINRA hearing panel found Black and Southeast in violation of these rules and imposed fines and sanctions, including barring Black from associating with other FINRA member firms.Black and Southeast appealed the FINRA decision to the National Adjudicatory Council (NAC), which affirmed the findings but reduced the fines in May 2019. They then petitioned the Securities and Exchange Commission (SEC) for review. On December 7, 2023, the SEC affirmed the NAC's decision regarding the supervisory and record retention violations but remanded the false testimony and fabricated documents issues to FINRA for further proceedings, determining that FINRA's failure to produce certain investigatory notes was not a harmless error.The United States Court of Appeals for the Fourth Circuit reviewed the SEC's decision. The court concluded that the SEC's decision was not a final order because it remanded part of the case to FINRA for further proceedings. As a result, the court determined that it lacked jurisdiction to review the petition and dismissed it. The court emphasized that a final order must mark the consummation of the agency's decision-making process and result in legal consequences, which was not the case here. View "Black v. Securities and Exchange Commission" on Justia Law

The plaintiffs, City of Warren Police and Fire Retirement System and David Freundlich, filed a consolidated securities action against CVS Health Corporation. They alleged that CVS's offering documents related to its 2018 merger with Aetna contained false statements and omissions, violating sections 11, 12(a)(2), and 15 of the Securities Act of 1933. The plaintiffs claimed that CVS overstated the value of its goodwill and failed to disclose significant issues with its Long Term Care (LTC) business, which it acquired through Omnicare, Inc. in 2015.The Superior Court of Rhode Island dismissed the plaintiffs' Revised Amended Consolidated Complaint (RACC), finding that the plaintiffs failed to state a claim under the Securities Act. The court also noted that similar claims had been dismissed in related cases in New York and the First Circuit. The plaintiffs appealed the dismissal, arguing that the Superior Court improperly applied collateral estoppel and failed to consider the merits of their claims.The Rhode Island Supreme Court reviewed the case and affirmed the Superior Court's dismissal. The Supreme Court held that the plaintiffs waived their right to challenge the merits of the dismissal by not adequately addressing it in their initial brief. The court also found that the Superior Court's decision to dismiss the case was supported by principles of judicial economy and comity, given the similar rulings in related cases. The Supreme Court concluded that the plaintiffs' appeal was without merit and upheld the lower court's judgment. View "In re CVS Health Corporation Securities Litigation" on Justia Law

Mark Nelson, operating North Country Weatherization Technologies, provided ice removal services to Pine View First Addition Association, a Minnesota non-profit homeowners' association, in spring 2023. Pine View's property manager, a North Dakota LLC, contacted Nelson for urgent ice removal due to water damage. Nelson completed the work and invoiced Pine View, but payment was delayed, allegedly due to Pine View's attempt to have insurance cover the costs. Nelson filed a lawsuit in North Dakota for breach of contract and unjust enrichment, seeking $79,695 plus interest and attorney’s fees.The District Court of Cass County, East Central Judicial District, granted Pine View's motion to dismiss for lack of personal jurisdiction, concluding that North Dakota did not have jurisdiction over Pine View, as it is a Minnesota entity and the services were performed in Minnesota. The court also denied Pine View's motion for Rule 11 sanctions against Nelson and his attorney, as well as Nelson's request for prevailing party attorney’s fees.The Supreme Court of North Dakota reviewed the case and reversed the district court's decision. The Supreme Court held that North Dakota has specific personal jurisdiction over Pine View because Pine View, through its North Dakota-based property manager, initiated contact with Nelson for the ice removal services. The court found that Pine View's contacts with North Dakota were sufficient to satisfy the state's long-arm provision and due process requirements. The Supreme Court also determined that the district court abused its discretion in denying Nelson's request for prevailing party attorney’s fees under Rule 11(c)(2), as Pine View's motion for sanctions against Nelson violated Rule 11(c)(5)(A). The case was remanded for further proceedings and to determine the amount of attorney’s fees Nelson is owed. View "Nelson v. Pine View First Addition Association" on Justia Law

The case involves a failed business venture between longtime friends, resulting in a $20 million judgment against Stanley N. Cohen for negligent misrepresentation. Cohen, a professor at Stanford University, and his colleague discovered a genetic mutation related to Huntington’s disease and formed a company, Nuredis, with Moshe and Chris Alafi, who invested $20 million. The FDA later rejected Nuredis’s request to conduct human clinical trials for the drug HD106 due to its toxicity. The Alafis sued Cohen and his colleague for negligent misrepresentation and other related causes, alleging they failed to disclose the drug’s history of being withdrawn from the market due to toxicity.The Santa Clara County Superior Court held a bench trial and found in favor of the plaintiffs on the negligent misrepresentation claim against Cohen, awarding $20 million in damages. The court did not reach the other causes of action. Cohen appealed, arguing that the claim failed as a matter of law and that the trial court committed prejudicial error by not issuing a statement of decision upon his request.The California Court of Appeal, Sixth Appellate District, found that the trial court’s failure to issue the requested statement of decision was prejudicial error, as it prevented effective appellate review of the trial court’s factual and legal findings. Consequently, the appellate court did not address Cohen’s arguments on the merits and reversed and remanded the case for the trial court to issue the statement of decision. View "Alafi v. Cohen" on Justia Law

Teradata Corporation sued SAP SE, alleging that SAP illegally conditioned sales of its business-management software (S/4HANA) on the purchase of its back-end database engine (HANA) in violation of Section 1 of the Sherman Act and misappropriated Teradata’s trade secrets under the California Uniform Trade Secrets Act. Teradata claimed that SAP’s tying arrangement forced customers to buy HANA, harming competition in the enterprise data warehousing (EDW) market. Teradata also alleged that SAP used its confidential batched merge method, a technique for efficient data aggregation, without authorization.The United States District Court for the Northern District of California granted summary judgment in favor of SAP. The court excluded Teradata’s expert testimony on market definition and market power, finding the methodology unreliable. Without this testimony, the court concluded that Teradata failed to create a material dispute on its tying claim. The court also ruled against Teradata on the trade secret claim, stating that Teradata did not properly designate the batched merge method as confidential and that the agreements between the parties gave SAP the right to use the method.The United States Court of Appeals for the Ninth Circuit reversed the district court’s summary judgment. The appellate court held that the district court abused its discretion by excluding the expert’s testimony, which was based on reasonable methodologies. The court found that Teradata raised a triable issue regarding SAP’s market power in the tying market and the anticompetitive effects in the tied market. The court also determined that there were material factual disputes regarding whether Teradata properly designated the batched merge method as confidential and whether the agreements allowed SAP to use the method. The case was remanded for further proceedings. View "TERADATA CORPORATION V. SAP SE" on Justia Law

The case involves Andris Pukke, Peter Baker, and John Usher, who were found liable for violations of the Federal Trade Commission Act, the Telemarketing Sales Rule, and a permanent injunction from a prior fraud case. They were involved in a real estate scam, selling lots in a development called "Sanctuary Belize" through deceptive practices. The district court issued an equitable monetary judgment of $120.2 million for consumer redress, imposed an asset freeze, and appointed a receiver.The United States District Court for the District of Maryland found the defendants liable after a bench trial and issued permanent injunctions against them. The court also held them in contempt for violating a prior judgment in a related case, ordering them to pay the same $120.2 million in consumer redress. The defendants appealed, and the United States Court of Appeals for the Fourth Circuit affirmed the district court's decision, except for vacating the monetary judgment to the extent it relied on FTC Act Section 13(b).The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's decision to maintain the receivership and asset freeze. The court held that the receivership and asset freeze were necessary to effectuate the injunctive relief and ensure that the defendants did not continue to profit from their deceptive practices. The court also found that the contempt judgment supported maintaining the receivership and asset freeze until the judgment was satisfied. The court emphasized the defendants' history of deceptive conduct and the need for a professional receiver to manage and distribute the assets to defrauded consumers. The judgment was affirmed. View "Federal Trade Commission v. Pukke" on Justia Law

Phhhoto Inc. filed a lawsuit against Meta Platforms, Inc., alleging that Meta engaged in anticompetitive practices that harmed Phhhoto's business. Phhhoto claimed that Meta's introduction of an algorithmic feed on Instagram in March 2016 suppressed Phhhoto's content, leading to a significant decline in user engagement and new registrations. Phhhoto argued that Meta's actions, including withdrawing access to Instagram's Find Friends API, terminating a joint project, and releasing a competing app called Boomerang, were part of a scheme to monopolize the market and eliminate Phhhoto as a competitor.The United States District Court for the Eastern District of New York dismissed Phhhoto's claim under Federal Rule of Civil Procedure 12(b)(6), ruling that it was time-barred by the four-year statute of limitations under the Sherman Act. The court found that Phhhoto's claim accrued outside the limitations period and that equitable tolling did not apply because Phhhoto failed to demonstrate fraudulent concealment by Meta.On appeal, the United States Court of Appeals for the Second Circuit reviewed the case de novo and concluded that Phhhoto sufficiently alleged that the statute of limitations should be equitably tolled due to Meta's fraudulent concealment. The court found that Meta's public statements about the algorithmic feed were misleading and constituted affirmative acts of concealment. The court also determined that Phhhoto did not have actual or inquiry notice of its antitrust claim until October 25, 2017, when it discovered evidence suggesting Meta's anticompetitive behavior. The court held that Phhhoto's continued ignorance of the claim was not due to a lack of diligence.The Second Circuit vacated the district court's judgment and remanded the case for further proceedings, allowing Phhhoto's antitrust claim to proceed. View "Phhhoto Inc. v. Meta Platforms, Inc." on Justia Law