Salzberg, et al. v. Sciabacucchi

Court: Delaware Supreme Court

Docket: 346, 2019

Opinion Date: March 18, 2020

Judge: Karen L. Valihura

Areas of Law: Business Law, Corporate Compliance, Securities Law

At issue before the Delaware Supreme Court in these cases was the validity of a provision in several Delaware corporations’ charters requiring actions arising under the federal Securities Act of 1933 (the “Securities Act” or “1933 Act”) to be filed in a federal court. Blue Apron Holdings, Inc., Roku, Inc., and Stitch Fix, Inc. were all Delaware corporations that launched initial public offerings in 2017. Before filing their registration statements with the United States Securities and Exchange Commission (the “SEC”), each company adopted a federal-forum provision. Appellee Matthew Sciabacucchi bought shares of each company in its initial public offering or a short time later. He then sought a declaratory judgment in the Court of Chancery that the FFPs were invalid under Delaware law. The Court of Chancery held that the FFPs were invalid because the “constitutive documents of a Delaware corporation cannot bind a plaintiff to a particular forum when the claim does not involve rights or relationships that were established by or under Delaware’s corporate law.” Because the Supreme Court determined such a provision could survive a facial challenge under Delaware law, judgment was reversed.

United States of America v. Sanofi Aventis U.S. LLC, et al.

Court: Delaware Supreme Court

Docket: 256, 2019

Opinion Date: March 17, 2020

Judge: Karen L. Valihura

Areas of Law: Business Law, Corporate Compliance

The Third Circuit Court of Appeals certified a series of questions of law to the Delaware Supreme Court. The Questions arose in connection with the prosecution of a qui tam action under the False Claims Act (“FCA”), In re: Plavix Marketing, Sales Practices and Products Liability Litigation (No. II), brought against Sanofi-Aventis U.S. LLC, Sanofi-Aventis U.S. Services, Inc., Aventis, Inc., Aventis Pharmaceuticals, Inc., Bristol-Myers Squibb Company, and Bristol-Myers Squibb Pharmaceuticals Holding Partnership (together, “Defendants”). The relator bringing the action, on behalf of the United States and several states, is JKJ Partnership 2011 LLP, a Delaware limited liability partnership. The partnership consisted of three individuals who allegedly were each an “original source” of knowledge upon which the allegations against Defendants were based. The Questions arose when one of the partners was replaced by another partner, and an amended complaint was filed shortly thereafter. Upon the filing of the amended complaint, the Defendants moved to dismiss, alleging, in-part, that replacing the partner was impermissible the under the FCA’s “first-to-file” bar. The United States District Court for the District of New Jersey (the “District Court”) granted the motion on that ground. The partnership appealed to the Third Circuit, which, in turn, certified the Questions that related to the “construction or application of” a Delaware statute “which has not been, but needed to be settled by the Delaware Supreme Court.

Whitaker v. Wedbush Securities, Inc.

Court: Supreme Court of Illinois

Citation: 2020 IL 124792

Opinion Date: March 19, 2020

Judge: Thomas L. Kilbride

Areas of Law: Banking, Business Law, Commercial Law

In 1987, Whitaker opened commodity futures trading accounts that eventually were assigned to Wedbush. Whitaker did not enter into a new customer or security agreement with Wedbush. Wedbush held Whitaker’s funds in customer segregated accounts at BMO Harris, which provided an online portal for Wedbush to process its customers' wire transfers. In December 2014, Wedbush received emailed wire transfer requests purporting to be from Whitaker but actually sent by a hacker. Wedbush completed transfers to a bank in Poland totaling $374,960. Each time, Wedbush sent an acknowledgment to Whitaker’s e-mail account; the hacker apparently intercepted all email communications. Whitaker contacted Wedbush after receiving an account statement containing an incorrect balance. After Wedbush refused Whitaker’s demand for the return of the transferred funds, Whitaker filed suit seeking a refund under the UCC (810 ILCS 5/4A-101). The circuit court rejected the UCC counts, stating that Wedbush had not operated as a “bank” under the UCC definition. The appellate court affirmed. The Illinois Supreme Court reversed, rejecting an argument that an entity may not qualify as a bank if it does not offer checking services. Courts construe the term “bank” in article 4A liberally to promote the purposes and policies of the UCC. The term “includes some institutions that are not commercial banks” and that “[t]he definition reflects the fact that many financial institutions now perform functions previously restricted to commercial banks, including acting on behalf of customers in funds transfers.”

Bullinger Enterprises v. Dahl, et al.

Court: North Dakota Supreme Court

Citation: 2020 ND 63

Opinion Date: March 19, 2020

Judge: Jensen

Areas of Law: Business Law

Bullinger Enterprises, LLLP appealed a district court’s judgment dismissing Bullinger Enterprises’ claims against Howard Dahl, Brian Dahl, and Thor Iverson (collectively, the Dahls). Bullinger Enterprises was owned by Michael Bullinger. In 2001, Bullinger Enterprises, Howard Dahl and Brian Dahl each acquired separate interests in the agricultural equipment manufacturing company Wil-Rich. The Dahls also owned Amity Technology, LLC (Amity). Amity manufactured sugar beet harvesters and air drill seeders. During 2010, Howard was seeking an equity investor to help Amity sell air drill seeders, a new product that had not yet achieved significant sales. Because of the common ownership and operational interactions between Amity and Wil-Rich, Howard asked Michael if he would be interested in having Wil-Rich included in a potential deal. Michael agreed; Howard and Thor Iverson later began negotiations with a potential investor, AGCO Corporation (AGCO). In October 2010, Thor emailed Michael a summary of the negotiations he had with AGCO which proposed a joint venture. Following the exchange of ownership, Amity entirely owned Wil-Rich and the prior owners of Wil-Rich owned an interest in Amity. Amity transferred its air drill seeder business to Wil-Rich. The joint venture between Amity and AGCO moved forward with Amity selling 50% of the Wil-Rich stock to AGCO for $30 million. Wil-Rich was then renamed AGCO-Amity JV, LLC, a joint venture owned by Amity and AGCO. By January 2012, Michael became concerned about the AGCO-Amity JV, LCC operations, specifically that the air drill seeder sales were under performing while the Wil-Rich related sales were over performing. In July 2018, Bullinger Enterprises commenced this action alleging claims of breach of fiduciary duties and deceit. All the claims arise from Bullinger Enterprises’ allegation that the Dahls misrepresented to him that AGCO set the value of Wil-Rich at $20 million and AGCO was not willing to value Wil-Rich any higher. Bullinger Enterprises claimed the misrepresentations led to a misallocation of the ownership of Amity following the exchange of the ownership of Wil-Rich for ownership in Amity. Bullinger Enterprises argued the district court erred in concluding its claims accrued no later than the end of March 2012 and, as a result, the claims are barred by the statute of limitations. Finding no reversible error, the North Dakota Supreme Court affirmed the district court’s judgment.

Westbrook v. Murkin Group

Court: South Carolina Supreme Court

Docket: 27957

Opinion Date: March 18, 2020

Judge: Per Curiam

Areas of Law: Business Law, Contracts, Legal Ethics

The issue this case presented for the South Carolina Supreme Court's review centered on whether Respondent, the Murkin Group, LLC (Murkin), engaged in the unauthorized practice of law (UPL). In April 2017, the Wando River Grill (Restaurant) became dissatisfied with the service of its linen supplier (Cintas) and Cintas' ability to supply the type of linens Restaurant needed. Restaurant contacted another supplier to secure some or all of its required linens and notified Cintas of its need to suspend at least a portion of Cintas' services. Cintas claimed Restaurant's suspension of service constituted a breach of the parties' contract, invoked a liquidated damages provision in the contract, sought more than $8,000 in damages, and hired Murkin to collect the outstanding debt. Petitioner, a South Carolina attorney, represented Restaurant in the resulting dispute. In April 2018, Murkin sent a demand-for-payment letter to Restaurant. Because a Murkin-prepared reinstatement agreement materially altered the terms of the parties' original contract and imposed new obligations on Restaurant and because the agreement's terms were contrary to discussions Cintas personnel had directly with Restaurant, Restaurant sent the proposed reinstatement agreement to Petitioner. All further communications were handled through Murkin. Ultimately, Restaurant did not sign the reinstatement agreement, and no South Carolina counsel for Murkin or Cintas contacted Petitioner. Further, Murkin threatened litigation of the dispute was not resolved. Petitioner then asked Murkin for the South Carolina Bar numbers of several Murkin employees, but Murkin felt Petitioner's desire to deal with Murkin's local counsel "means nothing, since that is a decision made between our client and our office." Murkin further claimed authority to bind any attorney to whom Murkin referred the matter to settle for no less than Murkin demanded. Petitioner lodged a petition with the Supreme Court, alleging UPL. A special master appointed by the Court determined Murkin went beyond the "mere collection of debt" and crossed into UPL by negotiating the contract dispute; purporting to advise Cintas as to what legal action it should take; advising the parties as to whether to take a settlement offer; and purporting to control whether and when the case would be referred to an attorney. The Supreme Court concurred Murkin's actions constituted UPL.