Articles Posted in Corporate Compliance

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This dispute arose from violations issued by the Department of Labor's Mine Safety and Health Administration. At issue was whether the word "corporation" includes limited liability companies (LLCs) for purposes of the Federal Mine Safety and Health Act of 1977 (the Mine Act), 30 U.S.C. 801 et seq. The court concluded that the terms "corporation" and "corporate operator" in the Mine Act are ambiguous. Applying Chevron deference, the court concluded that the Secretary's interpretation is reasonable where, most importantly, construing section 110(c) to include agents of LLCs is consistent with the legislative history. Therefore, the court held that an LLC is a corporation for purposes of the Mine Act and that section 110(c) can be used to assess civil penalties against agents of an LLC. Because substantial evidence supported the ALJ's decision to hold petitioners personally liable for the order at issue, the court affirmed on this issue. Finally, the order underlying their civil penalties was not duplicative. Accordingly, the court affirmed the ALJ's decision.View "Sumpter, et al. v. Secretary of Labor, et al." on Justia Law

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This case is one of many "clawback" actions initiated by the Receiver to recover profits from investors in a Ponzi scheme run by Arthur Nadel. The Lee Defendants appealed the district court's grant of summary judgment in favor of the Receiver on the Receiver's complaint under Florida Uniform Fraudulent Transfer Act (FUFTA), Fla. Stat. 726.101 et seq. The receiver appealed the denial of prejudgment interest on the profits Lee was ordered to return to the receivership entities. Since the undisputed facts show that Nadel's transfers to the Lee Defendants satisfy all the elements of FUFTA, the district court's grant of summary judgment in favor of the Receiver is due to be affirmed as is the judgment for the Receiver and against the Lee Defendants in the amount of $935,631.51. The court reversed and remanded with instructions for the district court to apply the factors in Blasland, Bouck & Lee, Inc. v. City of N. Miami, to determine whether equitable considerations justify denying or reducing a prejudgment interest award in light of Florida's general rule that prejudgment interest is an element of pecuniary damages. View "Wiand v. Lee, et al." on Justia Law

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Allen Davis exercised an option to purchase additional shares in CNG, a closely-held corporation but did not report the option as income on his federal income tax return. On appeal, Davis and CNG taxpayers challenged their respective deficiency notices in the Tax Court. The Tax Court determined that Davis should have included the value of the shares he received from the option's exercise in his 2004 gross income and sustained the Commissioner's deficiency notice. The Tax Court upheld the CNG taxpayers' deductions. Because the court held that CNG granted Davis the option in connection with the performance of services and that he should have included the value of the shares he received as ordinary income under 26 U.S.C. 83(a), the court also upheld CNG taxpayers' deductions, which were proper under section 83(h). Accordingly, the court affirmed the judgment of the Tax Court. View "Davis v. Commissioner of IRS" on Justia Law

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The bankruptcy trustee of Northlake, a Georgia corporation, filed suit against defendant, a shareholder of Northlake, alleging that a 2006 Transfer was fraudulent. The facts raised in the complaint and its exhibits, taken as true, were sufficient to conclude that Northlake's benefits under the Shareholders Agreement were reasonably equivalent exchange for the 2006 Transfer. Because the complaint contained no allegations indicating why these benefits did not constitute a reasonably equivalent exchange for the 2006 Transfer, the court had no ground to conclude that they did not. Accordingly, the court affirmed the judgment of the district court. View "Crumpton v. Stephen" on Justia Law

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Holston sued LanLogistics for breach of contract when LanLogistics never gave Holston an opportunity to match Gartlan's offer to purchase LanBox. Holston was a citizen of Florida and LanLogistics was incorporated in Delaware, maintaining its corporate headquarters in Miami, Florida. But by the time Holston filed suit, LanLogistics had dissolved and formally forfeited its authority to conduct business in Florida. At issue on appeal was the citizenship of a dissolved corporation for purposes of diversity jurisdiction and whether summary judgment was appropriately entered where there could have been a genuine issue of material fact. The court held that LanLogistics was only a citizen of Delaware and the court had subject matter jurisdiction where LanLogistics dissolved and formerly withdrew from business before Holston filed suit. The court reversed the district court's supplemental summary judgment order and remanded for a determination regarding the fair market value of each company in the package deal to identify the percentage of the purchase price used to purchase LanBox. View "Holston Investments Inc. B.V.I., et al. v. LanLogistics, Corp." on Justia Law

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Plaintiffs are personal investment holding corporations owned by two related Panamanian shareholders. Defendants, of who there are two distinct groups, are (1) a related group of banking corporations operating under the umbrella of Banco Santander, which provide banking, investment, and other financial management services; and (2) certain individual officers/employees of Santander. This dispute arose from plaintiff's investment of an undisclosed sum of money with defendants. At issue was whether a district court, having found a valid contract containing an arbitration clause existed, was also required to consider a further challenge to that contract's place within a broader, unexecuted agreement. Having considered those circumstances in light of Granite Rock Co. v. International Brotherhood of Teamsters and other relevant precedent, the court found that the district court properly construed the law regarding arbitrability in dismissing plaintiff's suit. Accordingly, the court affirmed the judgment. View "Solymar Investments, Ltd., et al. v. Banco Santander S.A., et al." on Justia Law

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Relators brought a qui tam action against defendant and its subsidiaries, alleging violations of the reverse false claim provision of the False Claims Act (FCA), 31 U.S.C. 3729(a)(7). Relators subsequently appealed the district court's dismissal, with prejudice, of their third amended complaint for failure to state a claim upon which relief could be granted. The district court held that relators failed to allege with particularity, as required by Rule 9(b), that defendants knowingly made false statements for the purpose of concealing or avoiding an obligation to pay money to the government. Count I alleged that the 2008 Certification of Compliance was false due to the failure to report or remit the million dollars in identified Overpayments, and that defendants made and used the Certification to conceal and avoid the obligation to remit Overpayments. Count II involved the same obligation to remit Overpayments within thirty days but was based on a separate scheme and separate false records. The court held that relators have sufficiently pled each element of a reverse false claim for the Certification of Compliance and the district court's dismissal of Count I was reversed. The court also held that relators have pled all the remaining elements for a reverse false claim for the Discovery Samples and thus, the district court's dismissal of Count II was reversed. View "Matheny, et al. v. Medco Health Solutions, Inc., et al." on Justia Law

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Davidson Directors and PBGC appealed the district court's order to distribute all of News-Journal assets to Cox, a long-time shareholder of the closely-held News-Journal. The court vacated the order, interpreting Florida's election-to-purchase statute to require that any payment made as a result of a corporation's share repurchase decision complied with the distribution requirements of Fla. Stat. 607.06401, which prohibited the distribution of corporate assets to a shareholder if it would render the corporation insolvent. Because the court considered any payment to Cox a distribution to a shareholder within the meaning of the statute, the district court erred when it ordered the distribution of all of News-Journal's assets to Cox without applying the insolvency test contained in the statute. If on remand, the district court finds a distribution to Cox would violate the statute, News-Journal's other creditors should receive payment before any distribution is made to Cox.

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In this securities fraud class action, the investor plaintiffs sued the defendant company and three of its principal officers, alleging that they had made a series of eleven false or misleading statements to the public, in violation of section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, 15 U.S.C. 78a et seq. Plaintiffs claimed that the false statements had the effect of artificially inflating the price of defendant's stock until the truth belatedly came out, at which time the stock price dropped and plaintiffs suffered substantial financial losses. The court held that the district court properly dismissed plaintiffs' claims arising from the alleged misstatements made on March 5, 2004 and July 26, 2004, because plaintiffs have inadequately pled scienter and falsity. However, as for plaintiffs' claims arising out of defendant's February 23, 2005 and March 16, 2005 statements, the court vacated the district court's entry of summary judgment. The court held that the securities laws prohibited corporate representatives from knowingly peddling material misrepresentations to the public, regardless of whether the statements introduced a new falsehood to the market or merely confirmed misinformation already in the marketplace. Accordingly, the court affirmed in part, vacated in part, and remanded for further proceedings.

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DynaVision (X) sued Brenda Smith, Robert Thomas, and Bryan Ownbey, (Y) alleging that they breached a fiduciary duty to tell X that Shelby Peeples (Z) had financed the purchase of its interest and moreover, that Y's failure to disclose Z's involvement fraudulently induced X to sell its interest to Y. X also brought suit against Z, the case before the court, alleging that Z violated federal securities law, state securities law, and state common law by denying involvement in the transaction and causing X to sell its interest to Y. X lost both cases on summary judgment because Y's alleged misrepresentation about Z's involvement in the buy-out did not cause X to sell its interest. Rather, X sold because it was in X's economic self-interest to do so. X needed Y's skills; had X purchased Y's interest, it would have had no one to run the carpet factory or to market its product. X therefore had no economically viable option but to sell. After assessing the merits of X's claims, the court affirmed the judgment granting summary judgment.