Articles Posted in Business Law

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Rule 12A, contained in Order 15 of the Cayman Islands Grand Court Rules 1995, is procedural and therefore does not apply where, as here, a plaintiff seeks to litigate his derivative claims in New York. Plaintiff owned ordinary shares in Scottish Re Group, Limited, a Cayman Islands company formerly engaged in the business of reinsurance. Plaintiff asserted both direct and derivative causes of action against Scottish Re and others. The only claims relevant to this appeal were Plaintiff’s derivative claims. Supreme Court dismissed Plaintiff’s derivative causes of action, ruling that, under Cayman Islands law, Plaintiff had not established standing because he did not seek leave of court to commence a derivative action under Rule 12A of the Rules of the Grand Court of the Cayman Islands. The Appellate Division affirmed based on Plaintiff’s noncompliance with Rule 12A, concluding that the rule applied because it was substantive rather than procedural. The Court of Appeals reversed, holding that Plaintiff’s derivative claims should not have been dismissed on the ground that he failed to comply with Rule 12A where Rule 12A is a procedural rule that does not apply in New York courts. View "Davis v. Scottish Re Group Ltd." on Justia Law

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There was personal jurisdiction over Defendant - a winery located in Pontevedra, Spain - under New York’s long-arm jurisdiction statute and, consequently, subject matter jurisdiction over the parties’ dispute under N.Y. Bus. Corp. Law 1314(b)(4). Supreme Court denied Defendant’s motion for summary judgment based on lack of personal and subject matter jurisdiction. The Appellate Division reversed, concluding that Defendant was not subject to personal jurisdiction under N.Y. C.P.L.R. 302(a)(1) of New York’s long-arm jurisdiction statute. The Court of Appeals reversed, holding that the exercise of long-arm jurisdiction over Defendant comported with federal due process because Defendant availed itself of the privilege of conducting business in New York by promoting its wine in the state, soliciting a distributor in the state, and selling wine to that New York-based distributor. View "D&R Global Selections, S.L. v Bodega Olegario Falcon Pineiro" on Justia Law

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Plaintiff appealed from an order of the Appellate Division affirming Supreme Court’s dismissal of Plaintiff’s complaint for failure to state a cause of action for fraudulent inducement against Chipotle Mexican Grill and its chief executive officer. As grounds for its decision, the Appellate Division concluded that Plaintiff’s damages were speculative and the facts alleged did not support an inference of calculable damages. The dissent concluded that the case should proceed to discovery to allow Plaintiff to accumulate evidence of a pecuniary loss because the pleading must be construed liberally and damages need not be proven during the pleading stage. The Court of Appeals affirmed, holding that Plaintiff failed to plead a cause of action for fraudulent inducement because he did not allege any out-of-pocket loss and otherwise plead a recoverable harm. View "Connaughton v Chipotle Mexican Grill, Inc." on Justia Law

Posted in: Business Law, Contracts

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The Attorney General filed suit against defendants, two former officers of AIG, under the Martin Act, Gen. Bus. Law art. 23-A, and Executive Law 63(12). On appeal, defendants challenged the availability of equitable relief. The court held that the Attorney General's claims against defendants withstand summary judgment and, therefore, should proceed to trial. The court concluded that the Attorney General may obtain permanent injunctive relief under the Martin Act and Executive Law 63 (12) upon a showing of a reasonable likelihood of a continuing violation based upon the totality of the circumstances. Therefore, the court rejected defendants' argument that the Attorney General must show irreparable harm in order to obtain a permanent injunction. Furthermore, defendants' reliance upon State of New York v Fine - in which the court held that the Attorney General must demonstrate irreparable harm to obtain a preliminary injunction under the Martin Act - is misplaced. Finally, the court concluded that disgorgement is an available remedy under the Martin Act and the Executive Law. Accordingly, the court affirmed the Appellate Division. View "People v Greenberg" on Justia Law

Posted in: Business Law

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Google Inc. and On2 Technologies, Inc. entered into a merger agreement in 2009. Thereafter, Plaintiff brought a class action on behalf of himself and other similarly situated On2 shareholders, alleging that On2’s board of directors had breached its fiduciary duty to its shareholders. Plaintiffs subsequently agreed with One2 and its directors to settle all claims with respect to the merger. After a hearing, Supreme Court found the settlement to be fair and in the best interest of the class members but refused to approve the settlement because it did not afford out-of-state class members of the opportunity to opt out, thereby prohibiting class members from pursuing any individual claims that are separate and apart from the class settlement. The Appellate Division affirmed. The Court of Appeals affirmed, holding that the lower courts properly refused to approve the proposed settlement because the settlement would deprive out-of-state class members of a cognizable property interest. View "Jiannaras v. Alfant" on Justia Law

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In 2012, Defendant Kenneth Cole proposed a going-private merger of Kenneth Cole Productions, Inc. that was subject to approval by both a special committee of independent directors and a majority of the minority shareholders. Several shareholders, including Plaintiff, commenced separate class actions alleging breach of fiduciary duty by Cole and the directors. Although the shareholder vote occurred after an amended complaint was filed, 99.8 percent of the minority shareholders voted in favor of the merger. In the amended complaint, Plaintiff sought a judgment declaring that Cole and the directors had breached the fiduciary duties they owed to the minority shareholders, an award of damages to the class, and a judgment enjoining the merger. Supreme Court granted Defendants’ motion to dismiss. The Court of Appeals affirmed, holding (1) in reviewing challenges to going-private mergers, New York courts should apply the business judgment rule as long as certain shareholder-protective conditions are present; (2) if those measures are not present, the entire fairness standard should be applied; and (3) applying that standard to this case, the courts below properly determined that Plaintiff’s allegations did not withstand Defendants’ motions to dismiss. View "In re Kenneth Cole Prods., Inc." on Justia Law

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Defendant was a CEO and director of now bankrupt Agra Services of Canada, Inc (Agra Canada) and an officer and director of Agra USA. Agra Canada entered into a purchase agreement with Cooperative Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) under which Rabobank purchased and financed certain receivables of Agra Canada. Thereafter, Defendant and Eduardo Guzman Solis, Agra Canada’s president and a manager of both Agra businesses, signed personal guarantees in favor of Rabobank. After Guzman Solis died, an investigation revealed fraudulent receivables based on nonexistent transactions submitted by Guzman Solis. Rabobank sued Agra Canada, Agra USA, and the estate of Guzman Solis seeking to recover the millions of dollars owed to Rabobank under the purchase agreement and guarantees. Defendant appeared represented by counsel but failed to retain counsel for Agra USA. The district court entered default judgment against Agra USA. Rabobank then filed this action in state court alleging that Defendant was liable under the guaranty. The Appellate Division granted Rabobank summary judgment. Defendant appealed, arguing that the default judgment against him was obtained by Rabobank’s collusion. The Court of Appeals affirmed, holding (1) Defendant’s collusion claim constituted a defense barred by the language in the guaranty; and (2) Defendant’s claim of collusion was contradicted by the record. View "Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro" on Justia Law

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Mahesh Gandhi and his two associates held equal interests in three corporations. The corporations secured a loan, part of which was loaned to the partners, of which Gandhi received a portion pursuant to promissory notes he signed and for which he made interest payments. Litigation among the partners and the corporations soon followed. The parties eventually executed a Settlement Agreement under which Gandhi sold his interest in the corporations to his associates. The corporate successors-in-interest to the corporations made monthly payments to Gandhi until Gandhi ceased paying interest on the notes. The corporations sued, asserting that they were entitled to offset the amount they owed Gandhi against the amount he owed them under the notes. At trial, Gandhi sought to assert a counterclaim for money current owed him under the Settlement Agreement. Supreme Court granted Gandhi’s motion to amend and entered judgment in his favor on the counterclaim. The Appellate Division reversed the judgment on Gandhi’s counterclaim, concluding that Gandhi’s request should have been barred by the doctrine of laches based on Gandhi’s delay in seeking leave to amend. The Court of Appeals reversed, holding that there was no prejudice to the corporations in allowing Gandhi’s amendment to assert the counterclaim for outstanding payments. View "Kimso Apts., LLC v. Gandhi" on Justia Law

Posted in: Business Law

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These two cases involved the dissolution of two separate law firms. After the law firms’ dissolution, the partners joined other law firms, which took on unfinished legal matters from the dissolved law firms’ former clients. The dissolved law firms subsequently filed for bankruptcy. Separate adversary proceedings were brought against the law firms that hired the dissolved law firms’ partners. The lawsuits were premised on the unfinished business doctrine, and the plaintiffs sought to recover the value of the dissolved law firms’ business for the benefit of the estate’s creditors. At issue before the Court of Appeals was whether, for purposes of administering a related bankruptcy, New York law treats a dissolved law firm’s pending hourly fee matters as its property. The Court of Appeals held that pending hourly fee matters are not partnership property or unfinished business within the meaning of New York’s Partnership Law, as a law firm does not own a client or an engagement and is only entitled to be paid for services actually rendered. View "In re Thelen LLP" on Justia Law

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Plaintiff initiated litigation to recover wrongfully diverted and concealed proceeds of a loan agreement, asserting that Defendants conspired to avoid repayment by denying their ownership and control over entities used to conceal converted funds. Before the conclusion of discovery in New York, federal authorities arrested Defendants, charging them with tax evasion and alleging a conspiracy to commit fraud on the New York court by forging documents and suborning perjury. A jury convicted Defendants of tax evasion, and the district court concluded that Defendants had perpetrated fraud on Supreme Court in New York. After Defendants’ sentencing, Plaintiff filed a motion to strike Defendants’ pleadings and for a default judgment. Supreme Court determined that Defendants had perpetrated a fraud on the court and granted the motion. The Appellate Division affirmed. The Court of Appeals affirmed in part, holding (1) where a court finds, by clear and convincing evidence, conduct that constitutes fraud on the court, the court may impose sanctions including striking pleadings and entering default judgment against the offending parties; and (2) with one exception, the record supported such sanctions against Defendants. View "CDR Creances S.A.S. v. Cohen" on Justia Law