Justia Civil Procedure Opinion Summaries

At issue in this case was the district court's grant of summary judgment to the court-appointed receiver for Winsome Investment Trust, a business entity whose founder, Robert Andres, caused it to illegally distribute funds as part of a Ponzi scheme. The court found that Andres had fraudulently transferred funds from Winsome to William Cornelius and his law firm, Cornelius & Salhab, and that the receiver could recover these funds on Winsome's behalf under the Uniform Fraudulent Transfer Act (UFTA). Cornelius, who was unaware of the fraud, raised several challenges to the district court's jurisdiction and its judgment on the merits. Finding no reversible error, the Tenth Circuit affirmed: the receiver was entitled to sue Cornelius in Utah, and no federal jurisdictional impediments prevent the district court from reaching the UFTA claim. The district court also correctly concluded the payments to Cornelius violated the UFTA and the four-year statute of limitations did not bar the receiver's claim. View "Klein v. Cornelius" on Justia Law

In "Hahn v. Diaz-Barba," (194 Cal.App.4th 1177 (2011)), the Court of Appeal affirmed an order, issued under the forum non conveniens doctrine, staying an action against residents of California for tortious interference with contract and related claims for the sale of an interest in a Mexican business. In this petition, the issue was whether the court erred by granting plaintiffs' motion to lift the stay on the ground Mexican courts dismissed two separate suits they filed in that country, making it an unavailable alternate forum. Defendants contended the ruling was erroneous because the evidence showed plaintiffs did not prosecute their action in Mexico in good faith. Among other things, defendants claimed they unreasonably delayed filing suit in Mexico and purposely drafted deficient complaints to ensure their rejection. Additionally, defendants argued the court prejudicially erred by denying their request to cross-examine the independent expert it appointed on Mexican law. After review, the California Court of Appeal concluded defendants' contentions lacked merit, and thus denied the petition. View "Diaz-Barba v. Super. Ct." on Justia Law

These appeals both involved damages actions by stockholder plaintiffs arising out of mergers in which the controlling stockholder, who had representatives on the board of directors, acquired the remainder of the shares that it did not own in a Delaware public corporation. Both mergers were negotiated by special committees of independent directors, were ultimately approved by a majority of the minority stockholders, and were at substantial premiums to the pre-announcement market price. Nonetheless, the plaintiffs filed suit in the Court of Chancery in each case, contending that the directors had breached their fiduciary duty by approving transactions that were unfair to the minority stockholders. In both appeals, it was undisputed that the companies did not follow the process established in "Kahn v. M&F Worldwide Corporation" as a safe harbor to invoke the business judgment rule in the context of a self-interested transaction. In both cases, the defendant directors were insulated from liability for monetary damages for breaches of the fiduciary duty of care by an exculpatory charter provision adopted in accordance with 8 Del. C. 102(b)(7). Despite that provision, the plaintiffs in each case sued the controlling stockholders and their affiliated directors, and also sued the independent directors who had negotiated and approved the mergers. The issue central to both, presented for the Supreme Court's review was whether, where the plaintiff challenges an interested transaction that is presumptively subject to entire fairness review, must plead a non-exculpated claim against the disinterested, independent directors to survive a motion to dismiss by those directors. The Court answered that question in the affirmative: a plaintiff seeking only monetary damages must plead non-exculpated claims against a director who is protected by an exculpatory charter provision to survive a motion to dismiss, regardless of the underlying standard of review for the board's conduct. The Court of Chancery in both of these cases denied the defendants' motions to dismiss because it read the Supreme Court's precedent to require doing so, regardless of the exculpatory provision in each company's certificate of incorporation. When the independent directors are protected by an exculpatory charter provision and the plaintiffs are unable to plead a non-exculpated claim against them, those directors are entitled to have the claims against them dismissed, in keeping with the Court's opinion in "Malpiede v. Townson" (and cases following that decision). Accordingly, the Court remanded both of these cases to allow the Court of Chancery to determine if the plaintiffs sufficiently pled non-exculpated claims against the independent directors. View "In Re Cornerstone Theraputics, Inc. Leal, et al. v. Meeks, et al." on Justia Law

More than three years after learning his insurance policy had expired and his agent had not procured a replacement, Joe Tally sued his insurance agent, Ronald McMorris, claiming he “breached a standard of care recognized in the State of Mississippi to the insured for not notifying [him] of the cancellation of [his insurance] policy.” Because Tally failed to bring his claims within the three-year statute of limitations, his claims were time-barred. The Supreme Court therefore reversed the circuit court’s denial of McMorris’s motion for summary judgment and rendered judgment in his favor. View "McMorris v. Tally" on Justia Law

In January 1992, Diversified Capital Management, Inc. leased premises designated as a grocery store to James Bostick. In August 1992, Diversified assigned its rights as lessor to Ingram Timber Enterprises, L.P. In October 2000, Bostick, with the approval of Ingram, subleased the property to CMM Properties, Inc. (“CMM”). The sublease was subject to all the terms of the original lease, referred to by the parties as the “master lease.” In June 2005, Ingram filed suit in superior court against CMM and three individual guarantors of the sublease (collectively “the CMM parties”), but not Bostick. Ingram claimed default under the terms of the master lease and sublease, and sought liquidated damages under the master lease. The trial court granted summary judgment to the CMM parties, finding that the purported liquidated damages constituted a void and unenforceable penalty. Ingram never appealed that final judgment. In January 2010, Ingram filed a complaint for rent and breach of contract against Bostick, seeking the same liquidated damages sought in the first suit. Then in November 2010, Bostick filed a third-party complaint against the CMM parties, claiming that if he was liable to Ingram, then the CMM parties were liable to him. The CMM parties moved for summary judgment, asserting, among other things, res judicata, based on the judgment in the first lawsuit. Before the trial court ruled on the summary judgment motion, Ingram and Bostick entered into a consent judgment, which provided that Ingram was entitled to judgment in excess of $1 million, but that Ingram would not attempt to collect such judgment. Instead, the consent judgment would be satisfied by Bostick pursuing the case against the CMM parties. The trial court granted the CMM parties' motion for summary judgment, finding that res judicata precluded the suit; that the remedy provisions of the master lease were void and unenforceable penalties; and that under the terms of the consent judgment between Ingram and Bostick there was no real threat of liability for Bostick, and thus, no secondary liability to be recovered by the third-party action. Bostick appealed to the Court of Appeals, arguing that he was not a party to the first lawsuit, therefore, it could not preclude him in the second. The Court of Appeals affirmed, and as to the issue of res judicata, finding that Bostick and the CMM parties were privies, and therefore, that Bostick was bound by the judgment in the first lawsuit. The Supreme Court reviewed the case and concluded that the appellate court's analysis and conclusion were "fatally flawed" because they were premised "on a basic misconception of the doctrine of res judicata:" as a privy of the CMM parties, the doctrine could not be applied against Bostick because of the lack of an adversarial relationship in regard to the prior litigation. "Even if Bostick was not deemed to be such a privy of the CMM parties, res judicata is not properly asserted against him by the CMM parties so as to preclude Bostick's third-party complaint because Bostick was not involved in the initial suit brought by Ingram." The case was remanded to the Court of Appeals for further proceedings. View "Bostick v. CMM Properties, Inc." on Justia Law

Benihana America obtained a preliminary injunction in aid of arbitration of a dispute arising under its license agreement with Benihana of Tokyo, prohibiting Tokyo from: selling unauthorized food items at the restaurant it operates under the license agreement; using certain trademarks in connection with that restaurant in a manner not approved by the license agreement; and arguing to the arbitral panel, if it rules that Tokyo breached the license agreement, that Tokyo should be given additional time to cure any defaults. The Second Circuit affirmed with respect to the menu offering and trademark use injunctions. The court reasonably concluded that each of the relevant factors favored Benihana America. The court reversed the prohibition on arguing to the arbitral panel for an extended cure period. When a dispute is properly before an arbitrator, a court should not interfere with the arbitral process on the ground that, in its view of the merits, a particular remedy would not be warranted. Benihana America may challenge an arbitrator’s decision in court only after it has been issued. It may not subvert its agreement to arbitrate by obtaining an advance judicial determination that there are no grounds for the arbitrator to grant a particular remedy. View "Benihana, Inc. v. Benihana of Tokyo, LLC" on Justia Law

The owner of Mamilove, LLC, and its officers, sisters Michele and Lorraine Reymond sought rescission of a franchise agreement and damages for claims related to their negotiations for, and ultimate purchase of, a daycare franchise. The named defendants were the franchisor, Legacy Academy, Inc., and its officers, Frank and Melissa Turner (collectively “Legacy”). Ten years after they signed the franchise agreement at the heart of this dispute, the Reymonds alleged Legacy fraudulently induced them to sign the agreement by providing false information about the historical earnings of existing Legacy Academy franchisees. They sought to rescind the franchise agreement and recover damages for claims based on alleged fraud, negligent misrepresentation and violation of the Georgia Racketeer Influences and Corrupt Organizations Act (RICO). After a jury trial, the trial court denied Legacy's motion for a directed verdict as to all of the Reymonds' claims. The jury found in the Reymonds' favor, and awarded $750,000 in damages plus attorney fees. Legacy appealed, raising various challenges, including a challenge to the trial court's ruling on its motion for directed verdict. Upon review, the Supreme Court concluded the trial court erred in denying Legacy's motion for a directed verdict as to fraud, negligent misrepresentation and a violation of the RICO statute. The Court reversed the Court of Appeals who affirmed the trial court with regard to these claims, and remanded the case for further proceedings. View "Legacy Academy, Inc. v. Mamilove, LLC" on Justia Law

Plaintiffs-appellants Donald Kipnis, Lawrence Kibler, Barry Mukamal and Kenneth Welt,appealedthe district court’s Federal Rule of Civil Procedure 12(b)(6) dismissal of their complaint against defendants-appellees Bayerische Hypo-Und Vereinsbank, AG and HVB U.S. Finance, Inc. (collectively, “HVB”) as barred by the applicable statutes of limitations. This appeal arose out of the parties’ participation in an income tax shelter scheme known as a Custom Adjustable Rate Debt Structure (“CARDS”) transaction. In short, Plaintiffs alleged that HVB and its co-conspirators defrauded Plaintiffs by promoting and selling CARDS for their own financial gain. Plaintiffs “paid a heavy price in damages” as a result of HVB’s wrongdoing, including “substantial fees (and interest payments)” they paid HVB and other CARDS Dealers to participate in the CARDS strategy and “hundreds of thousands of dollars in ‘clean-up’ costs” they incurred after HVB failed to advise them to amend their tax returns. Consequently, Plaintiffs sought to recover the “damages that reasonably flow” from HVB’s misconduct. These damages included fees they paid to HVB and other CARDS Dealers, attorney’s fees and accountant’s fees incurred in litigating against the IRS, back taxes and interest paid by Plaintiffs, punitive damages, treble damages, and attorney’s fees and costs incurred in the instant action. The district court rejected Plaintiffs’ argument that their claims did not accrue until November 1, 2012, because they did not sustain any damages until the tax court issued its final decision. By December 5, 2001 (plaintiffs’ mandatory repayment date) Plaintiffs had sustained part of the damages they sought to recover, including the fees they paid to HVB.The district court found Plaintiffs’ reliance on the Florida Supreme Court’s decision in "Peat, Marwick, Mitchell & Co. v. Lane," (565 So. 2d 1323 (Fla. 1990)), to be misplaced, and dismissed Plaintiffs’ complaint as time-barred. The parties agreed that Florida law controlled the sole issue in this appeal: when did Plaintiffs’ claims against HVB accrue for purposes of the statutes of limitations. It was not clear under Florida law when Plaintiffs first suffered injury, and thus when their claims against HVB accrued for purposes of the applicable statutes of limitations. Because the relevant facts were undisputed, and this appeal depended wholly on interpretations of Florida law regarding the statute of limitations, the Eleventh Circuit certified a question of Florida law to the Florida Supreme Court. View "Kipnis v. Bayerische Hypo-UND Vereinsbank, AG" on Justia Law

The government filed a civil complaint seeking forfeiture of funds held in a brokerage account. The clerk entered a default against Appellants and all other potential claimants. The district court granted the government’s motion for entry of default and, concluding that Appellants could not allege a meritorious defense, refused to grant their motion to set aside the default judgment under Fed. R. Civ. P. 60(b)(1). The court did not specifically articulate any “extreme circumstances” justifying entry of default and default judgment. A panel of the Ninth Circuit affirmed, holding (1) courts reviewing a Rule 60(b) motion must apply the factors outlined in Falk v. Allen to ensure that the “extreme circumstances” policy is recognized, but nothing in Rule 60(b) nor the Court’s precedent requires a district court to articulate on the record particular “extreme circumstances” before it denies a motion to set aside a default judgment; and (2) after applying the Falk factors, it is clear that Appellants had no meritorious defense, and therefore, the district court did not abuse its discretion in denying Appellants’ Rule 60(b)(1) motion. View "United States v. Aguilar" on Justia Law

A judgment creditor attempted to collect from a partnership after receiving a judgment against the partnership. The partnership proved to be undercapitalized, and its assets could not satisfy the judgment debt. The judgment creditor brought this action seeking a judgment against the individual partners. The trial court granted the partners’ motion for summary judgment. The court of appeals affirmed, concluding that limitations precluded pursuit of the partners’ assets because the limitations period began when the underlying cause of action accrued, and that period had passed. The court of appeals affirmed. The Supreme Court reversed, holding (1) the limitations period against a partner generally does not commence until after final judgment against the partnership is entered; and (2) because this action was brought within that period, limitations did not bar this suit against the partners. View "Am. Star Energy & Minerals Corp. v. Stowers" on Justia Law