Justia Civil Procedure Opinion Summaries

In 2009, XTO Energy, Inc., filed an interpleader action, seeking to resolve competing claims to oil and gas proceeds held by XTO. XTO named several potential claimants as defendants in the interpleader action, including Seawatch Royalty Partners, LLC (managed by Chester Ellsworth) and several alleged heirs of the record owner of the relevant oil and gas interests. After a bench trial, the court concluded that a group of individuals (deemed the true heirs of the record owner) were entitled to the proceeds. Of relevance to this appeal, the trial court also ruled that Seawatch’s claims and defenses were frivolous; that Seawatch was an alter ego of Ellsworth; and that Seawatch and Ellsworth were jointly and severally liable for any future award of attorneys’ fees. Ellsworth was subsequently joined as a party under C.R.C.P. 21 and served via substituted service. The post-judgment sanctions proceedings continued for another several years. During that time, Ellsworth contested his individual liability, arguing that the court lacked personal jurisdiction over him; that he had been improperly served; and that Seawatch was not, in fact, his alter ego. The trial court rejected these arguments and entered judgment jointly and severally against Seawatch and Ellsworth for approximately $1 million in attorneys’ fees. Ellsworth appealed pro se. In an unpublished opinion, the court of appeals vacated the judgment against Ellsworth, holding that the district court lacked jurisdiction to hold him jointly and severally liable for the attorneys’ fee award because, as a nonparty, Ellsworth did not have notice and opportunity to contest his individual liability. The Colorado Supreme Court concluded Ellsworth had adequate notice and opportunity to challenge the alter ego findings that established his liability, and reversed the appellate court's judgment. View "Stockdale v. Ellsworth" on Justia Law

The Tenth Circuit addressed whether the federal district court in Colorado may exercise specific personal jurisdiction over out-of-state defendant Continental Motors, Inc. based upon its contacts with Colorado through its website. Continental Motors’ website allows airplane repair businesses known as fixed- base operators (“FBOs”) to obtain unlimited access to its online service manuals in exchange for an annual fee. Arapahoe Aero, a Colorado-based FBO participating in the program, accessed and consulted the manuals in servicing an airplane that contained engine components manufactured by Continental Motors. The airplane later crashed in Idaho on a flight from Colorado. After the crash, Old Republic Insurance Company, the airplane’s insurer, paid the owner for the property loss and filed a subrogation action against Continental Motors in Colorado federal district court, seeking reimbursement. Old Republic alleged that Continental Motors’ online service manuals and bulletins contained defective information, thereby causing the crash. Continental Motors moved to dismiss the lawsuit for lack of personal jurisdiction, arguing that it did not purposely direct its activities at Colorado. Old Republic conceded that Continental Motors did not maintain sufficient contacts with Colorado to support jurisdiction for all purposes. The district court granted the motion to dismiss, ruling that it did not have specific jurisdiction over Continental Motors. On appeal, Old Republic maintains that Continental Motors was subject to specific personal jurisdiction in Colorado for purposes of this case. Finding no reversible error in dismissal, the Tenth Circuit affirmed. View "Old Republic Insurance Co. v. Continental Motors" on Justia Law

Duke was the founder and CEO of Skinsation. Defendants were Duke’s investors and members of the board of directors. In 2011, Callaway sued Skinsation, Duke, and defendants over a commercial lease, which Duke and defendants personally guaranteed. A judgment of $385,072. was entered, jointly and severally. Duke owned 49 percent of Skinsation stock and defendants combined owned 51 percent. In 2013, Skinsation’s outstanding capital stock had a fair market value of $1.2-$1.5 million. In May 2014, Duke and defendants unsuccessfully attempted to settle their respective contributions. The next day, defendants convened a shareholder meeting without notice to Duke and removed her as a director and terminated Duke’s employment. Defendants entered into a settlement with Callaway. For payment of $397,694, Callaway released defendants from all obligations under the judgment and assigned then all interest in the judgment. The judgment, plus accrued interest, was $444,286.56. Defendants served Duke with notice of levy on all of her Skinsation capital stock, claiming $448,029.90. Defendants purchased all of Duke’s shares at a sheriff’s sale. Duke sued. The court dismissed Duke’s cause of action for conversion. The court of appeal mandamus relief. A judgment debtor may not enforce an assignment of the judgment against a co-judgment debtor for more than the co-judgment debtor’s proportionate share of the judgment and may not enforce an assignment of the judgment against a co-judgment debtor without first seeking judicial determination of the proportionate share of the co-debtor’s liability. View "Duke v. Superior Court" on Justia Law

In 2011 and 2012, a number of individuals and closely held corporations known as Treasure Your Success (TYS) operated a fraudulent credit card interest reduction scheme. Universal Processing Services of Wisconsin, LLC (Universal) violated the Telemarketing Sales Rule (TSR), 16 C.F.R. 310.1 et seq., by providing substantial assistance to the TYS schemers. The district court found that a violation of the TSR constitutes an “unfair or deceptive act or practice” in violation of the Federal Trade Commission Act. As such, the district court was authorized to order restitution and disgorgement. Furthermore, the court clarified that substantial assistance under the TSR was itself sufficient to justify joint and several liability. The court reaffirmed its order holding Universal jointly and severally liable; Universal contended that was error and joint and several liability can only lie where the defendant is a participant in a common enterprise with the primary violators. The Eleventh Circuit concluded after review the district court did not abuse its discretion in holding Universal jointly and severally liable with the members of the TYS scheme. View "Federal Trade Comm'r v. Universal Processing Services of Wisconsin, LLC" on Justia Law

Apple shareholders filed a consolidated derivative action concerning Apple’s alleged pursuit and enforcement of anticompetitive agreements with other Silicon Valley companies to prohibit the recruitment of each other’s employees. Plaintiffs alleged that certain current and former members of Apple’s board of directors were aware of or tacitly approved of Apple’s practices and breached their fiduciary duties by permitting the illegal agreements over many years. Plaintiffs alleged that the Apple board never disclosed settlements of an earlier action filed by the Department of Justice based on violations of the federal antitrust laws and several federal class action lawsuits brought by employees of Apple and other technology companies. Given each board member’s alleged role in participating in or allowing the illegal agreements, plaintiffs claimed that any demand on Apple's board to institute the derivative action against the individual defendants should be excused as a futile and useless act. The superior court found that an amended complaint adequately alleged demand futility as to the board in place when the original action was filed. The composition of the board of directors had changed in the interim. The court of appeal disagreed. The court was required to assess demand futility as to the board in place when the amended complaint was filed. View "Apple, Inc. v. Superior Court" on Justia Law

The Delaware Companies challenged Delaware’s right to audit whether funds paid for stored-value gift cards issued by their Ohio-based subsidiaries are held by the Companies and subject to escheatment. Their argument relied on Supreme Court precedent establishing priority among states competing to escheat abandoned property, giving first place to the state where the property owner was last known to reside. If that residence cannot be identified or if that state has disclaimed its interest, second in line is the state where the holder of the abandoned property is incorporated; any other state is preempted from escheating the property. The Companies argued that money left unclaimed by owners of the stored-value cards is held by the Ohio Subsidiaries, so Delaware can have no legitimate escheatment claim and must be barred from auditing the Companies in connection with the gift cards. The Third Circuit held that private parties can invoke federal common law to challenge a state’s authority to escheat property but agreed that dismissal was proper. “The notion that the State cannot conduct any inquiry into abandoned property to verify a Delaware corporation’s representations regarding abandoned property lacks merit” and, to the extent the Companies challenged the scope or means of the audit, the claim is not ripe, since Delaware has taken no formal steps to compel an audit. View "Marathon Petroleum Corp v. Secretary of Finance for the State of Delaware" on Justia Law

Profit Boost Marketing, Inc., d/b/a Hometown Values Coupon Magazine ("HVCM"), one of the defendants in the underlying case, petitioned the Alabama Supreme Court for a writ of mandamus to direct the Marshall Circuit Court to vacate its order denying HVCM's motion to dismiss the claims filed against it by Mike Zak d/b/a Hometown Magazine ("Zak") and to direct that court to enter an order dismissing Zak's claims against it. HVCM was a Washington state based "print broker ... for direct mail advertising." Hometown Magazine was a coupon distributor; Mike Zak was its sole proprietor. In August 2013, Zak and HVCM entered into a "Print Brokerage Agreement" and related "Licensing Agreement" whereby Zak was to become an exclusive "Area Publisher" of HVCM's coupon magazine in three specified zones within Alabama. Zak obtained from the City of Arab ("the City") a business license to engage in "publishing industries." Zak ultimately published a single issue of a publication entitled Hometown Magazine. According to HVCM, "[i]nstead of publishing as [HVCM], Zak formed Hometown Magazine and used the [HVCM] trademark when he sold advertising to local business," i.e., allegedly, "Zak solicited ... clients as [HVCM], sold them advertising using the [HVCM] trademark ..., and never published a magazine as [HVCM]." This action resulted in a dispute between Zak and HCVM. As a result of a Facebook post, which Zak maintained "was entirely fallacious and possessed absolutely no truth," Zak allegedly began to receive queries from customers regarding the legality of his activities. Ultimately, according to Zak, his reputation was allegedly so "irreparably tarnished and damaged" that Zak was forced to close his business. Zak sued the City and various fictitiously named defendants. Specifically, Zak sought to recover both compensatory and punitive damages on various theories, including defamation, negligence, and "wantonness/gross negligence." After review of the trial court record, the Supreme Court held the trial court erred in denying HVCM's motion requesting dismissal of Zak's claims on statute-of-limitations grounds; therefore the Court granted HVCM's petition and issued a writ of mandamus directing the Marshall Circuit Court to vacate its January 3, 2017, order denying HVCM's motion and to enter an order dismissing HVCM as a defendant in the underlying action. View "Ex parte Profit Boost Marketing, Inc., d/b/a Hometown Values Coupon Magazine." on Justia Law

This case presented for the Oregon Supreme Court's review the question of when, if ever, the filing of a third-party complaint constitutes the “filing of a proceeding under subsection (1)” of ORS 60.952(6), such that the shareholder of a closely-held corporation who filed the proceeding could be bought out by the corporation or another shareholder. The corporation here, Graydog Internet, Inc., had only two shareholders: Douglas Westervelt, the company’s president and majority shareholder, and David Giller, an employee and minority shareholder. Graydog initiated the underlying case, at Westervelt’s direction, when it filed a declaratory judgment action against Giller raising an issue regarding his employment. As part of his response, Giller filed a third-party complaint against Westervelt. Graydog then filed an election to purchase Giller’s shares under ORS 60.952(6). Giller objected, arguing that filing a third-party complaint did not constitute the “filing of a proceeding” as that term is used in ORS 60.952(6) and that the claims in the third-party complaint were not “under [ORS 60.952(1)].” For those reasons, Giller asserted, Graydog could not elect to purchase his shares. The Oregon Supreme Court agreed that ORS 60.952(6) did not apply to Giller’s third-party complaint, and therefore reversed the decision of the Court of Appeals which held to the contrary. View "Graydog Internet, Inc. v. Giller" on Justia Law

All Masonry & Landscape Supply (All Masonry) appealed a postjudgment order awarding attorney fees to Oldcastle, the prevailing party in a breach of contract action. Oldcastle manufactured masonry and concrete products, including its Belgard-branded concrete pavers and segmented retaining walls. All Masonry distributed landscape supplies and concrete products to customers. All Masonry claimed that in 2001, it entered into an agreement with Oldcastle to be Oldcastle's exclusive dealer of Belgard products in San Diego County. The 2001 dealer agreement was part written and part oral. In 2013, All Masonry sued Oldcastle for breaching the 2001 dealer agreement by distributing Belgard products through other dealers in San Diego County. Oldcastle prevailed on the breach of contract cause of action in 2015 when the court granted its motion for summary adjudication on that claim, rejecting All Masonry's contention that it had the exclusive right to sell Belgard at preferential pricing in San Diego County. Oldcastle filed a postjudgment motion to recover attorney fees in connection with All Masonry's breach of contract claim. The court awarded Oldcastle $180,120 in attorney fees for defending the breach of contract cause of action through summary adjudication and for litigating the postjudgment fees motion. The Court of Appeal reversed the award of attorney fees to Oldcastle, finding no clear and unequivocal evidence that the parties intended to incorporate the terms of a 2010 credit application into their 2001 dealer agreement, which was the basis of the fee award. Civil Code section 1642 does not allow the recovery of attorney fees in this case. View "R.W.L. Enterprises v. Oldcastle, Inc." on Justia Law

Former restaurant employees sued their former employer, Koji’s Japan, Inc. (Koji’s), Koji’s president, sole shareholder and director Arthur Parent, Jr. (Parent), and A.J. Parent Company, Inc., otherwise known as America’s Printer (America’s Printer), of which Parent was also the president, sole shareholder and director. The plaintiff employees alleged wage and hour claims under the federal Labor Code and the Fair Labor Standards Act of 1938 (FLSA), claims under the California unfair competition law (Bus. & Prof. Code, sec. 17200), and a claim under the California Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, sec. 2699 et seq.). Considering this appeal as a petition for a writ of mandate, the Court of Appeal granted writ relief by holding: (1) the trial court erred by granting the motion to certify a class as to plaintiffs’ claims against only Koji’s because the court applied improper criteria in determining Parent’s potential liability as a joint employer on a class-wide basis; (2) the trial court prejudicially erred by denying plaintiffs’ revised motion to compel further responses to a set of document requests, and also by sanctioning plaintiffs’ counsel; (3) because the Court directed the trial court to vacate its order denying the revised motion to compel further responses to discovery on alter ego issues, the Court directed the trial court to also vacate its findings that Parent and America’s Printer were not Koji’s alter egos; and (4) although the trial court’s statement of decision correctly cited the controlling case law in this matter, the statement of decision misapplied the law as set by that case. View "Turman v. Superior Court" on Justia Law