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Business Law Today

March 2024

Recent Developments in Business Courts 2024

Benjamin Raymond Norman and Benjamin Mark Burningham

Recent Developments in Business Courts 2024

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§ 2.1 Introduction

The 2024 Recent Developments describes developments in business courts and summarizes significant cases from a number of business courts with publicly available opinions. There are currently functioning business courts of some type in cities, counties, regions, or statewide in twenty-five states: (1) Arizona; (2) Delaware; (3) Florida; (4) Georgia; (5) Illinois; (6) Indiana; (7) Iowa; (8) Kentucky; (9) Maine; (10) Maryland; (11) Massachusetts; (12) Michigan; (13) Nevada; (14) New Hampshire; (15) New Jersey; (16) New York; (17) North Carolina; (18) Ohio; (19) Pennsylvania; (20) Rhode Island; (21) South Carolina; (22) Tennessee; (23) West Virginia; (24) Wisconsin; and (25) Wyoming. States with dedicated complex litigation programs encompassing business and commercial cases, among other types of complex cases, include California, Connecticut, Minnesota, and Oregon. The California and Connecticut programs are expressly not business court programs as such. Utah and Texas will begin operating business courts in 2024.

§ 2.2 Recent Developments

§ 2.2.1 Business Court Resources

American College of Business Court Judges. The American College of Business Court Judges (ACBCJ) provides judicial education and resources, in terms of information and the availability of its member judges, to those jurisdictions interested in the development of business courts. The ACBCJ’s Eighteenth Annual Meeting will take place in Reno, Nevada, from April 24, 2024, to April 26, 2024.

Section, Committee, and Subcommittee Resources. The ABA Business Law Section provides a Diversity Clerkship Program that sponsors second-year law students of diverse backgrounds in summer clerkships with business and complex court judges. The ABA Business Law Section has created a pamphlet, Establishing Business Courts in Your State, which is available among other resources in the online library for the Business and Corporate Litigation Committee’s community web page. The Business and Corporate Litigation Committee’s Subcommittee on Business Courts provides documents and/or hyperlinks to business court resources. This includes links to public sources and legal publications, as well as business court related materials and panel discussions presented at ABA Business Law Section meetings. The Section also has established a Business Courts Representatives (BCR) program, where a number of specialized business, commercial, or complex litigation judges are selected to participate in and support Section activities, committees, and subcommittees. These BCRs attend Section meetings, and many have become leaders within the Section. Judge Elizabeth Hazlitt Emerson of the Supreme Court of the State of New York Commercial Division and Judge John E. Jordan of Florida’s Ninth Judicial Circuit served as BCRs for the 2021-2023 term, and Judge Julianna Theall Earp of the North Carolina Business Court and Judge Anne C. Martin of the Chancery Court of Davidson County, Tennessee, serve as BCRs for the 2022-2024 term. Finally, this publication has included a chapter on updates and developments in business courts every year since 2004.

Other Resources. “The National Center for State Courts (NCSC) and the Tennessee Administrative Office of the Courts (AOC) developed an innovative training curriculum and faculty guide – along with practical tools – to help state courts establish and manage business court dockets more efficiently and effectively.” The Business Courts Blog aims to serve as a national library to those interested in business courts, with posts on past, present, and future developments. This includes posts on reports and studies going back twenty years, as well as recent developments in business courts. In 2023, there were articles and reports addressing aspects of business courts. There are also various legal blogs with content relating to business courts in particular states.

§ 2.2.2 Developments in Existing Business Courts

§ Arizona Commercial Court

The Arizona Rule of Civil Procedure governing Arizona’s commercial court, Rule 8.1, was amended slightly in March 2023 to fix an incorrect cross-reference. The previous version of Rule 8.1(d)(4), which governed assignment of cases to the commercial court, was amended to correctly cross-reference another subsection of the Rule. The previous version of Rule 8.1(d)(4) provided as follows:

Assignment. Upon the filing of a complaint by a plaintiff requesting assignment to the commercial court under (e)(2), or the filing by another party of a Notice Requesting Assignment to the Commercial Court under (e)(3), the case will be assigned to the commercial court.

However, subsections (e)(2) and (e)(3), referenced in the previous version of Rule 8.1(d)(4), concerned requirements surrounding the early meeting of the parties and the preparation of a joint report and proposed scheduling order, not the assignment of a case to the Arizona commercial court. The current version of the Rule 8.1(d)(4) provides as follows:

Assignment. Upon the filing of a complaint by a plaintiff requesting assignment to the commercial court under (d)(2), or the filing by another party of a Notice Requesting Assignment to the Commercial Court under (d)(3), the case will be assigned to the commercial court.

The updated cross-references to subsections (d)(2) and (d)(3) in the current version of Rule 8.1(d)(4) now correctly reference the subsections detailing what a plaintiff or another party must do to request assignment of a case to the commercial court.

Beyond this technical revision, there are no other changes that were made to Rule 8.1 concerning Arizona’s Commercial Court.

§ Florida’s Complex Business Litigation Courts

Florida’s business courts saw a number of changes this year. Most notable, however, was the state’s expansion from six business court divisions to seven. Indeed, early this year, the Ninth Judicial Circuit completed its planned expansion and opening of a new business court division in Osceola County (Division 23). Presiding over the new division is Judge John E. Jordan, who was also re-appointed to continue presiding over the Ninth Judicial Circuit’s business court division in Orange County (Division 43).

In addition to the physical growth of its business courts, 2023 also included significant changes to Florida’s roster of business court judges. In the Eleventh Judicial Circuit, Judges Thomas Rebúll (Division 43) and Lisa Walsh (Division 44) were appointed to succeed Judges Michael Hanzman and Alan Fine, each of whom resigned from the bench to pursue new opportunities. In the Seventeenth Judicial Circuit, Judge Patti Englander Henning retired in March after 43 years of judicial service, and was succeeded in Division 26 by Judge Carol-Lisa Phillips, who now serves alongside Chief Judge Jack B. Tuter (Division 07). The business court for the Thirteenth Judicial Circuit was the only court without any significant changes this year, and Judge Darren Farfante (Division L) continues in his role there.

§ Iowa Business Specialty Court

Iowa Supreme Court Assigns Three Iowa Business Specialty Court Judges. District Judge Rustin Davenport (Mason City), District Judge David Odekirk (Waterloo), and Senior Judge Michael Schilling (Burlington) were assigned by the Iowa Supreme Court to the Business Specialty Court on November 13, 2023. The Iowa Supreme Court based its selection on educational background, judicial and trial practice experience in business and complex commercial cases, and personal interest in the business court.

Judge Davenport earned his undergraduate degree from Drake University in 1982 and his law degree, with distinction, from the University of Iowa College of Law in 1985. Judge Davenport clerked for the Second Judicial District from 1985–1986 and for the Honorable David R. Hansen, United States District Court Judge, Northern District of Iowa from 1986–1988. Judge Davenport was in private practice from 1988–2010 and was appointed to the bench in October 2010. He has previously served as President of the Iowa Judge’s Association and is a member of the American Bar Association, Iowa State Bar Association, Judicial District 2A Bar Association, and the Cerro Gordo County Bar Association.

Judge Odekirk earned his bachelor’s degree, with honors, from the University of Iowa in 1989 and his law degree from the University of Iowa College of Law in 1993. Following his graduation, Judge Odekirk moved back to his hometown in Waterloo, Iowa, where he practiced civil litigation and trial work for over 20 years. Judge Odekirk was appointed to the bench in 2014. He is currently the immediate past president and member of the Iowa Judges Association and is a member of the Black Hawk County Bar Association, Iowa State Bar Association, and the American Bar Association.

Judge Schilling earned his undergraduate degree, with honors, from the University of Iowa in 1973 and his law degree, with distinction, from the University of Iowa College of Law in 1976. Following his law school graduation, Judge Schilling served as a VISTA volunteer lawyer on three Native American reservations in Nebraska and as an Assistant Public Defender. Judge Schilling practiced criminal and civil trial work for almost 30 years, was appointed to the bench in 2006, and took senior status in 2023. Judge Schilling has served on several committees including the Iowa Supreme Court’s Civil Justice Reform Task Force and the Eighth Judicial District’s Mediation Committee. Judge Schilling served as a drug court judge for several counties for nine years and is a member of the Des Moines County Bar Association, Iowa State Bar Association, American Bar Association, American Judicature Society, and the Iowa Judges Association.

Iowa Business Specialty Court will be Evaluated by State Court Administration Every Two Years. Starting in 2023, the Iowa Business Specialty Court will be evaluated by state court administration every two years. The evaluation is expected to ensure the court continues to accomplish its mission and to identify opportunities to improve its operations. The first report, prepared in December 2023, will evaluate the court for calendar years 2021 and 2022. Subsequent reports will be prepared by state court administration every two years.

§ Indiana Commercial Court

The Indiana Office of Court Services continues to maintain a beta search engine for substantive Indiana Commercial Court Orders. The database allows users to narrow their search by date and the specific commercial court. Users are encouraged to provide feedback, as the Commercial Court staff works to identify and build historical content.

Additionally, the Indiana Commercial Courts Handbook, which is updated regularly, continues to be an aid for both judges and attorneys, covering procedural topics such as case management conferences, discovery, class actions, and trial preparation, and including sample case documents and forms. The Indiana Commercial Court Treatise also covers substantive topics such as non-compete covenants, fiduciary duties, piercing the corporate veil, preliminary injunctions, and receiverships.

On October 20, 2023, it was announced that Marion County Commercial Court Judge Heather A. Welch would retire effective February 2, 2024. She is one of 10 commercial court judges in Indiana and serves as the co-chair of the Commercial Courts Committee. Additionally, on November 15, 2023, President Biden nominated St. Joseph County Commercial Court Judge Cristal C. Brisco to fill a vacancy on the U.S. District Court for the Northern District of Indiana. Pursuant to Rule 7 of the Indiana Commercial Court Rules, the Commercial Courts Committee will review applications to fill the expected vacancies from current judges in each respective county, and will then provide the Indiana Supreme Court with a list of up to three recommended nominees for each vacancy. Three judges have applied for the Marion County vacancy: Judge Kurt M. Eisgruber, Judge James Joven, and Judge Christina Klineman. It is unclear whether any applications have been received for the St. Joseph County vacancy.

§ Massachusetts Business Litigation Session (BLS)

Business Litigation Session (“BLS”) Judge Michael D. Ricciuti has been appointed Chief Justice of the Superior Court. He will begin his five-year term on December 22, 2023. The Court will announce Judge Ricciuti’s replacement in the next few weeks.

There were no new procedural orders for the BLS in 2023.

§ Michigan Business Courts

Michigan’s Adoption of Continuing Judicial Education Rules. On November 1, 2023, the Michigan Supreme Court announced its adoption of the Michigan Continuing Judicial Education Rules, effective January 1, 2024. These rules require every judicial officer in the state to complete at least 24 hours of continuing judicial education every two years. A judicial officer’s credited hours must consist of 6 hours of education related to integrity and demeanor and 18 hours of education within the subject area of “judicial practice and related areas.” The CJE program will be overseen by a 12-member board, which will comprise two appellate court judges, two circuit court judges, two district court judges, two probate court judges, three quasi-judicial officers, and one retired judge.

Although these new rules apply to all Michigan state judges, Michigan’s business court statute has always required training for business court judges. Judge Thomas P. Boyd, Administrator of Michigan’s State Court Administrative Office, recently announced that judicial training sessions, which were suspended during the COVID-19 pandemic, are expected to return in 2024.

2023 Business Court Appointments. The business court bench remained largely the same in 2023, with only two new appointments: Curtis J. Bell (Kalamazoo County) and B. Chris Christenson (Genesee County). Both new appointees will serve for a term expiring April 1, 2025.

§ New York Commercial Division

Commercial Division Updates Rules on Motion Papers. On December 16, 2022, Acting Chief Administrative Judge Amaker announced amendments to Commercial Division Rule 16, Motions in General, effective January 3, 2023. The amendments provide for the following:

  1. Counsel submitting exhibits to motion papers should clearly separate them with divider pages with the exhibit numbers, instead of tabs.
  2. Counsel shall follow the hyperlinking guidance under Commercial Division Rule 6 for motion papers.
  3. The Court may direct counsel to submit hard copies of decisions or other authorities not readily available, instead of such hard copy submissions being mandatory.

These amendments to Rule 16 are identical to the language proposed by the Commercial Division Advisory Council in February of 2022. In the request for public comment on the proposed amendments, the Advisory Council explained that these revisions were aimed at modernizing the language of Rule 16 “to reflect the widespread use of electronic filing”—with the use of divider pages instead of tabs and the inclusion of hyperlinking.

Commercial Division Updates Rules on Motions in Limine. Effective June 5, 2023, Commercial Division Rule 27 regarding motions in limine was amended. The amended rule now provides a deadline for oppositions to any such motions, which must be filed no later than two days before the return date of the motion unless otherwise directed by the court. The amended rule further clarifies which issues are appropriately addressed via motion in limine, rather than via objections to pre-trial disclosures. Specifically, the rule states that basic threshold issues such as lack of foundation or hearsay should be made via objections to pre-trial disclosures, whereas “[m]otions in limine should be used to address broader issues [including] (1) the receipt or exclusion of evidence, testimony or arguments of a particular kind or concerning a particular subject matter, (2) challenges to the competence of a particular witness, or (3) challenges to qualifications of experts or to the receipt of expert testimony on a particular subject matter.” The amended rule similarly cautions that “[m]otions in limine should not be used as vehicles for summary judgment motions.”

§ South Carolina Business Court Program

Business Court Program Amended for First Time in Four Years. On July 14, 2023, the South Carolina Supreme Court entered an administrative order narrowing the Business Court Program’s jurisdiction and replacing retired judges.

This order supersedes the previous one from January 30, 2019, which provided the program with jurisdiction over the following matters:

  • Title 33—South Carolina Business Corporation Act of 1988;
  • Title 35—South Carolina Uniform Securities Act of 2005;
  • Title 36, Chapter 8—South Carolina Uniform Commercial Code: Investment Securities;
  • Title 39, Chapter 3—Trade and Commerce: Trusts, Monopolies, and Restraints of Trade;
  • Title 39, Chapter 8—Trade and Commerce: The South Carolina Trade Secrets Act; and
  • Title 39, Chapter 15—Trade and Commerce: Labels and Trademarks.

In addition to these specified case types, the 2019 order allowed the program to hear “such other cases as the Chief Business Court Judge may determine.” But the 2023 order eliminates the Chief Business Court Judge’s discretion, narrowing the jurisdictional parameters to only the specified case types.

The 2019 Order also replaced Judges R. Markley Dennis, Jr. and Alison R. Lee, who retired from the bench, with Judges Jocelyn Newman and Walton J. McLeod, IV.

§ West Virginia Business Court Division

Proposed Rule Amendments. On October 19, 2023, the Supreme Court of Appeals of West Virginia requested comments on proposed amendments to the provisions of the Business Court Division as set out in Rules 29.07, 29.08, 29.09, and 29.10 of the West Virginia Trial Court Rules. In summary, the proposed amendments would permit business court judges to hold hearings and trials in any county in the state, if agreed to by all parties and the presiding judge. The proposed amendments would also allow for arbitration to be used as a form of alternative dispute resolution in business court cases. Comments were due on or before December 22, 2023.

Currently, Rule 29.07 sets out the procedure for assigning the presiding and resolution judges in Business Court Division cases. In addition, Rule 29.07 permits the presiding judge to preside over the case in any county within the Business Litigation Assignment Region, as defined in Rule 29.04, in which the case was filed. Proposed amendments to Rule 29.07 would be an addition, also permitting business court judges to preside over an action in any county within West Virginia if the parties and the presiding judge approve.

Rule 29.08, which prescribes the powers and duties of presiding and resolution judges, currently permits the presiding judge in a business court case to schedule conferences, motions, mediation, pretrial hearings, and trials in any circuit court courtroom within the Assignment Region, as defined by Rule 29.04. However, the proposed amendments to Rule 29.08 would permit presiding judges in business court cases to also schedule conferences, motions, mediation, pretrial hearings, and trials in (1) the filing county, (2) in any county within the Business Litigation Assignment Region, or (3) any other county within West Virginia if the parties and presiding judge approve. In addition, the proposed amendments would create an order of preference for jury trials in business court cases: (1) the filing county; (2) in any county within the Business Litigation Assignment Region; or (3) in any county within West Virginia upon the agreement of the parties and the presiding judge.

Another proposed amendment to the business court rules would create a method and procedure for arbitration in business court cases in Rule 29.09 of the West Virginia Trial Court Rules. Under the amendment, upon the agreement of the parties, any case referred to the Business Court Division is available for either binding or non-binding arbitration. The parties may have their case arbitrated by either one Business Court Division Judge or by a panel of three Business Court Division Judges. If the parties agree to have their case arbitrated by a three-judge panel, then the plaintiff will choose one judge, the defendant will choose one judge and, the Chair of the Business Court Division will choose the third judge. Usually, the arbitration will take place in the courtroom in the county where the action is pending, however, it may also be conducted in any courtroom in the Business Litigation Assignment Region, or any other place which the parties and the Chief Arbitrating Judge agree to.

Within thirty days of the conclusion of the arbitration hearing, or within thirty days after the receipt of the final memorandum of the parties, the arbitration decision is to be submitted to the Presiding Judge for entry of the judgment. However, if the arbitration was binding and carried out by a three-judge panel, then the decision must be unanimous to be binding and final.

§ Wisconsin Commercial Docket Pilot Project

There have been no updates to Wisconsin’s Commercial Docket Pilot Project, which was extended in 2022 for two years, with an end date of July 30, 2024. The Court originally approved the Project to create specialized commercial dockets in 2017. Under the current rule, the Chief Justice of the Wisconsin Supreme Court assigns judges to the Project after considering the recommendation of the chief judge in the relevant Judicial Administrative District. Currently, twenty-six counties in Wisconsin participate in the program: Waukesha, Dane, Racine, Kenosha, Walworth, Brown, Door, Kewaunee, Marinette, Oconto, Outagamie, Waupaca, Ashland, Barron, Bayfield, Burnett, Chippewa, Douglas, Dunn, Eau Claire, Iron, Polk, Rusk, St. Croix, Sawyer, and Washburn. The state’s largest county—Milwaukee—has yet to participate in the Project.

§ Wyoming Chancery Court

The Wyoming Chancery Court celebrated its two-year anniversary on December 1, 2023, with good reason. New case filings nearly doubled from 15 in the first year to 29 in the second year. During its first two years, the court handled 44 cases involving 152 different parties and 61 unique attorneys. For the least populated state in the nation, these numbers represent a promising trajectory.

In addition to the increase in case filings, the Chancery Court’s second year marked other notable developments. Specifically, the court seized its first two opportunities to define and clarify its jurisdictional contours through the cases of Clark v. Romo, 2023 WYCH 4 (Wy. Ch. C. June 16, 2023), and Lincolnway v. Villalpando, 2023 WYCH 6 (Wy. Ch. C. Oct. 6, 2023). Both are summarized below.

§ 2.2.3 Other Developments

§ Texas Business Court

When Governor Abbott signed House Bill 19 and Senate Bill 1045 in June 2023, Texas became the latest state to join the modern business court movement and the first to establish an appellate business court. Both the appellate and trial courts open this fall, hearing cases filed on or after September 1, 2024.

Here are key details about Texas’s business courts.

  • HB 19 created 11 business court divisions aligned with the existing administrative judicial regions in Texas. Five of the eleven divisions serve urban centers and go live September 2024. The remaining six divisions, which serve more rural areas, will be abolished if not authorized and funded by September 1, 2026.
  • Unlike elected district court judges, the governor will appoint business court judges with the advice and consent of the Senate. The governor will appoint two business court judges to each of the five urban divisions and one judge for each of the six rural divisions (if funded). Appointed judges will serve two-year terms but may be reappointed.
  • Parties can either file cases directly in business court or remove cases from district or county court to the business court.
  • Business courts have limited jurisdiction, concurrent with district courts, over two lists of action types—one list where the amount in controversy exceeds $10 million, and another where the controversy exceeds $5 million. The $10 million minimum case list includes commercial and contract disputes, as well as certain violations of the finance or business code, while the $5 million minimum list includes governance and security disputes. The $5 million threshold does not apply if the party is a publicly traded corporation. These minimum amounts also exclude interest, statutory damages, exemplary damages, penalties, attorneys’ fees, and court costs.
  • Business courts also enjoy civil jurisdiction (again, concurrent with district courts) in actions seeking injunctive or declaratory relief in the case types outlined above.
  • Business courts further enjoy supplemental jurisdiction over any other related claim if all parties and the judge agree.
  • Business courts must use juries when required by Texas Constitution. A jury trial in a case initially filed in business court will be held in any county in which the case could have been filed. In a case removed to district court, the jury trial must be held in the county where the action was originally filed. If a contractual provision specifies a venue, the jury trial must be held in that venue.
  • Business court orders or judgments are appealable to the newly created Fifteenth Court of Appeals, a specialized appellate business court located in Austin. The procedures for an appeal from business court are the same as those for appeals from district court.

§ Utah Business and Chancery Court

Like Texas, Utah enacted legislation in 2023 to establish its own business court. Utah named its new court the business and chancery court. It launches fall 2024 with a single judge.

Key features of Utah’s new court follow.

  • The business and chancery court will conduct bench trials only, transferring cases to district court when a party requests a jury trial.
  • The court will have limited, statewide, jurisdiction, concurrent with Utah’s district courts. It will handle disputes seeking monetary damages of at least $300,000, or seeking solely equitable relief, and with claims arising from specific causes of action related to business and commercial activities. These include: breach of contracts and fiduciary duties; internal business governance; sale, merger, dissolution, receivership, or liquidation of a business; liability or indemnity disputes among owners; indemnification of officers or owners; tortious interference or other unlawful act against a business; commercial insurance coverage disputes; the UCC; the Uniform Trade Secrets Act; misappropriation of intellectual property; non-compete, non-solicitations, and nondisclosure or confidentiality agreements; franchise disputes; securities; blockchain and DAO disputes; antitrust; certain malpractice claims; forum selection clauses that identify Utah or other states’ business courts; and shareholder derivative claims.
  • Notably, at least 48 hours before an oral argument, the court must provide parties with tentative rulings on the motion. Final decisions and orders will be published and available on the Utah Court’s website.

§ 2.3 2023 Cases

§ 2.3.1 Delaware Superior Court Complex Commercial Litigation Division

In re CVS Opioid Litigation (Claims seeking generalized economic damages to redress the opioid crises are not covered under liability insurance policies). Liability insurers filed suit against retail pharmacy giant, CVS Health Corporation (“CVS”), for a declaratory judgment that they owed no duty to defend or indemnify CVS in suits brought by nine governments to recover costs associated with the opioid epidemic. The insurers argued that they had no duty to defend or indemnify CVS because the policies required allegations of physical injuries for coverage and that the governments did not claim that they suffered bodily injury and did not seek damages on behalf of opioid users.

The court held that the liability policies cover only “damages because of bodily injury,” and not the negligence and public-nuisance claims brought by the state and local governments. Specifically, it held that the claims “must directly relate to and be predicated upon a particular bodily injury” to be covered, but “none of the complaints seek to recover for damages because of the individual injuries sustained by a person.” Rather, the governments’ complaints sought redress for the communal economic losses suffered. Therefore, the court granted the insurers’ motion for partial summary judgment and declared that the insurers were not required to defend CVS against lawsuits seeking only economic damages.

BCORE Timber EC Owner, LP v. Qorvo US, Inc. (Granting motion to dismiss on the basis of forum non conveniens). The court held that this is “one of those rare cases” in which the defendant met its high burden of showing that the forum non conveniens factors weighed so heavily in its favor that it would face “overwhelming hardship” were the case to proceed in Delaware. This dispute involved a commercial property in Greensboro, North Carolina, which was leased to Qorvo US, Inc. (“Qorvo”). The lease provided that, subject to certain restrictions, tenants could make alterations to the property, but, at the option of the landlord, they may be required to remove any or all alterations or improvements at their expense. When Qorvo refused to remove alterations it made to the property, BCORE Timber EC Owner, LP (“BCORE”) brought suit for waste, breach of contract, and a declaration that Qorvo is obligated to indemnify BCORE. Qorvo filed a motion to dismiss for improper venue, arguing that the subject matter of BCORE’s claims had no connection to Delaware and that it would suffer overwhelming hardship if it were forced to litigate in Delaware.

Because the Delaware action was the only action filed in this dispute, the court applied the “overwhelming hardship” standard to determine whether dismissal was warranted. The court found that this standard was met because the forum non conveniens factors weighed so overwhelmingly in Qorvo’s favor that dismissal of the Delaware litigation was required to avoid undue hardship and inconvenience to Qorvo. Those factors are: (i) the relative ease of access to proof; (ii) the availability of compulsory process for witnesses; (iii) the possibility of a view of the premises; (iv) the applicability of Delaware law; (v) the pendency or nonpendency of a similar action or actions in another jurisdiction; and (vi) “all other practical problems that would make the trial of the case easy, expeditious and inexpensive.” Here, the only salient connection between this action and Delaware was the named entities’ incorporation or registration. Considering that, along with the totality of the other factors, the court determined that dismissal was warranted.

§ 2.3.2 Florida’s Complex Business Litigation Courts

The Plurinational State of Bolivia v. Arturo Carlos Murillo-Prijic et al. (To successfully plead conspiracy jurisdiction under Florida’s long-arm statute, a plaintiff must make clear, positive and specific allegations of a defendant’s participation in the conspiracy). Following a successful appeal, the Plurinational State of Bolivia (“Bolivia”) was given leave to file a third amended complaint for the purpose of amending its allegations supporting personal jurisdiction over Condor S.A. (“Condor”). The claim against Condor arose from a conspiracy involving former senior Bolivian government officials and a national defense contractor (“Bravo”). The complaint alleged that Bolivian officials conspired with Bravo and Condor in a bribery and money laundering scheme to award Bravo a contract at an inflated rate, and for Bravo to pay bribes to the officials. In her decision on Condor’s motion to dismiss for lack of personal jurisdiction, Judge Walsh determined that Bolivia’s allegations as to Condor asserted no more than that it was an intermediary that “should have inferred” the existence of the scheme. Because those allegations fell short of making the required “specific allegations of [Condor’s] knowledge or participation in a scheme to commit bribery or money laundering,” and Bolivia failed to prove a basis for long-arm jurisdiction in light of Condor’s affidavit refuting Bolivia’s jurisdictional allegations, Judge Walsh dismissed Bolivia’s claims against Condor with prejudice.

Miami-Dade Expressway Authority et al. v. Greater Miami Expressway Agency et al. (The public official standing doctrine bars a state agency from bringing a constitutional challenge to a statute affecting them). In a long-running legal battle by state officials to establish control over the five main expressways and toll roads in Miami-Dade County, Judge Walsh recently denied Miami-Dade Expressway Authority’s (“MDX”) emergency motion for a “status quo” temporary injunction while a related appeal is pending. MDX’s emergency motion followed a final declaratory judgment in Leon County, wherein the Second Judicial Circuit held that MDX was a state agency that was dissolved by an amendment of the Florida Legislature, and ordered that its assets and obligations be transferred to a newly created state agency, the Greater Miami Expressway Agency (“GMX”). Noting that it was MDX’s ultimate goal in the litigation before her to obtain a declaratory judgment finding the amendment unconstitutional, Judge Walsh denied MDX’s motion on the ground that, as a state agency, it lacked standing to challenge a statute affecting it under the public official standing doctrine. But the battle for control over Miami-Dade’s highways continues, as GMX’s appeal of the Second Judicial Circuit’s ruling in favor of MDX is currently pending in the First District Court of Appeal.

§ 2.3.3 State-wide Business Court in Georgia

Dufour v. Dufour (Judicial dissolution of a law firm and appointment of a receiver). This partnership dispute arose between two brothers who operated a law firm in Carrollton, Georgia. For over a decade, the brothers split profits from the practice equally between them under the terms of a handwritten agreement. In 2018, Defendant suggested they shift to a pro-rata compensation structure to reflect the parties’ workloads and productivity. Defendant insisted that proposal became binding on the parties via a series of emails. Plaintiff disagreed. He sued, alleging his brother breached the original, handwritten agreement by effectively seizing control over the partnership, its accounts, and its other assets. The action was filed first in Carroll County superior court. There, Plaintiff asked that a receiver be appointed over the law firm, but the superior court denied that request. The parties later agreed to remove the case to the State-Wide Business Court, however, where Plaintiff renewed his motion to appoint a receiver.

This time, the court granted the motion. The court noted at the start that Georgia’s State-wide Business Court has authority to exercise the powers of any equity court, including to appoint a receiver to oversee a partnership’s dissolution. While the parties disagreed over whether their partnership was in fact already dissolved under Georgia’s Uniform Partnership Act because of Defendant withdrawing from it in July 2022, they both, at a minimum, acknowledged the partnership should be dissolved. The court therefore ordered the partnership dissolved, remaining intact only as needed to wind up its affairs. The court then concluded that a neutral receiver was warranted to take possession of, and protect, the partnership’s assets during that dissolution process. Support for that conclusion included dueling allegations about breaches of duty and partnership obligations; misappropriation of files; interference with each other’s legal practice; and other acrimonious dealings between the brothers. Accordingly, the court appointed a receiver agreed to by the parties.

OZ Media, LLC v. Greenberg Film and TV Studio Holdings (Criminal contempt proceedings). This action involved ownership and management rights to a television and movie production company. Ozie Areu and Steven Greenberg formed Greenberg Georgia Film and TV Studio Holdings (“Greenberg Georgia” or “the company”), a Delaware LLC, as part of a bankruptcy reorganization plan in 2021. The following year, Areu sued Greenberg alleging, among other things, that Greenberg used his authority as majority member to shut out Areu from the company’s operations. Areu also asserted that Greenberg and others were obstructing his use of an office space at a studio that Greenberg Georgia runs, in violation of the company’s operating agreement. By consent of the parties, the court entered a TRO that secured Areu’s access to the office space. But less than a month later, Defendants moved for criminal contempt. The motion contended that Plaintiffs violated the TRO by using their access to the studio to take control of its website and email system, causing Greenberg to be arrested at the studio and jailed in connection with purported threats and stalking charges, and publicizing that arrest, all of which disrupted the studio’s business.

The court denied the motion after an evidentiary hearing. First, the court emphasized the high bar for holding a party in criminal contempt, including that evidence admitted must establish guilt beyond a reasonable doubt. Second and relatedly, the court noted that, in support of their request, Defendants did not present any live witness testimony at the hearing but relied only on affidavits filed with the motion, preventing Plaintiffs an opportunity to cross examine the affiants, which a party facing criminal contempt is constitutionally entitled to do. The court therefore denied the motion. But the court observed that it would also be an abuse of discretion for the court to graft onto the TRO a restriction against Areu pursuing separate criminal proceedings for threats allegedly made against him, where the TRO was limited, by its terms, to Areu’s right to use the studio office space.

§ 2.3.4 Indiana Commercial Court

Arrow Container, LLC v. Clare Allison (Denying the plaintiff’s motion for temporary restraining order). In Arrow, Arrow Container, LLC (a manufacturer, marketer, and seller of packaging materials and related products and services) filed a complaint and motion for a TRO to enforce non-compete and non-solicit provisions against a former employee. Among other things, the Indianapolis-based plaintiff sought to restrain the defendant-employee from working for a competitor within a 100-mile radius of the plaintiff’s Indianapolis office. The defendant had accepted employment for a competitor in Green Bay, Wisconsin, supporting the competitor’s Cincinnati division in Lebanon, Ohio (i.e., more than 100 miles from the plaintiff’s office), while working remotely from her home in Greenwood, Indiana (i.e., within a 100 miles of the plaintiff’s office). The plaintiff also sought to restrain the defendant-employee from contacting or soliciting any customer of the plaintiff to whom the plaintiff had provided services within the 12 months preceding the defendant’s employment with the plaintiff. Particularly at issue was a post the defendant made on her LinkedIn page which stated:

Big things coming for this girl in 2023! Excited for a new year, new inspiration, and so thankful for new opportunities to thrive! How are you making a big impact in 2023?

#inspiration #opportunities #packaging #boxes #manufacturing #thriving #happinessmatters #operational excellence #new year #growthmindset

The post included a photograph of the defendant tossing the box into the air with the words: “Same Clare / New Company!” and “New resources & more options coming to your area!” Neither the post nor the defendant’s bio referenced her new employment at the competitor or tagged any customers or prospective customers.

The court held that the plaintiff failed to demonstrate a likelihood of success on the merits for its claim for breach of the non-compete provision. “Merely performing remote work within the geographic scope of a non-competition covenant on behalf of customers or business operations located outside the scope of the ‘restricted territory,’ without more, is insufficient to state a claim for the breach of a non-compete.” The court failed to see how the defendant received some “unique competitive advantage or ability to harm” the plaintiff by working remotely from her home and sending emails and making phone calls to customers located outside of the restricted area of her non-compete that she would otherwise not receive if she moved to a location 100+ miles from the plaintiff’s office. “Without evidence that [the defendant] is servicing or soliciting customers within the geographic scope of the Non-Compete, or otherwise directing competitive activities within the geographic scope of the Non-Compete, the Court finds that [the defendant] is not in violation of the Non-Compete.”

The court also held that the defendant’s LinkedIn post did not violate the non-solicit provision, and was instead a “generic, non-targeted job announcement” that was publicly available to anyone on LinkedIn. The court noted that the defendant did not receive any inquiries in response to her post, and that there was nothing in the record to indicate that she had any intention of soliciting or selling to any customers falling within the scope of her non-solicit agreement. Thus, the court found that the substance, apparent intent, and effect of the post did not support the conclusion that it was a customer solicitation and that it was not made for the purpose of selling packaging materials and/or related services to the plaintiff’s existing customers in violation of the non-solicit agreement.

HCW Evansville Hotel, LLC et al. v. Butler, Rosenbury & Partners, Inc. et al. (Granting in part and denying in part the defendant’s motion to dismiss and for a more definite statement). In HCW, the defendant BRP sought dismissal of claims for breach of contract, restitution, and promissory estoppel, arguing (among other things) that none of the individual plaintiffs alleged the requisite elements of breach of contract against the BRP and instead impermissibly attempted to consolidate their individual elements by alleging the breach of contract claim collectively. Specifically, BRP asserted that (1) HCW Development was not the real party in interest because it was not damaged, (2) HCW was not the real party in interest because it was neither a party to nor an intended beneficiary of the BRP contract; and (3) HCW, LLC was not the real party in interest because it had nothing to do with anything that happened and did not contract with BRP.

The court agreed that the plaintiffs’ use of the collective term “HCW” was vague and that each allegation that included the term was not “simple, concise, and direct” because it did not indicate which plaintiff(s) entered the contract with BRP (or alternatively, conferred a benefit upon BRP or relied on a promise by BRP). The court held that the plaintiffs cannot “lump together” their allegations using vague terms and definitions to create a valid claim against BRP. Rather, BRP is entitled to know which entity is asserting a claim against it. However, the court declined to dismiss the claims against BRP because, once specified, the allegations might state claims for breach of contract, restitution, and promissory estoppel. Instead, the court granted BRP’s request for a more definite statement, holding that if the plaintiffs still could not assert that the party to the contract was the party that suffered damages, then BRP could seek dismissal.

BNAB, LLC et al. v. Franklin St Lofts LLC et al. (Granting the defendants’ motion to compel). In BNAB, the defendants sought to compel the production of handwritten notes taken by the plaintiffs’ (30)(b)(6) designee and which he had discussed during his deposition. In support of their motion, the defendants cited Indiana Rule of Evidence 612, which provides that an adverse party is entitled to receive copies of the writings used to refresh a witnesses’ recollection before testifying. The defendants argued that the witness stated during his deposition that he used the notes to refresh his memory, and therefore waived any attorney-client privilege regarding the notes. They further argued that the notes were not protected because they documented conversations and meetings that occurred outside the presence of counsel and prior to the initiation of the lawsuit. In response, the plaintiffs argued that the witness took the notes at the request of the plaintiffs’ attorney for the purpose of communicating with its attorney in anticipation of litigation and therefore the notes were protected. The plaintiffs also argued that the defendants failed to satisfy the Sporck Test which provides that (1) the witness must use the object or writing to refresh his memory; (2) the witness used the document for the purpose of testifying; and (3) allowing the questioning party to inspect the writing is necessary in the interest of justice. See Ind. R. Evid. 612(a)(2); Sporck v. Peil, 759 F.2d 312, 317-318 (3d Cir. 1985).

The court found that, taking the Plaintiffs’ contentions as true, the notes were prepared by the witness to provide information to his attorney and as such were protected by the attorney-client privilege. The court also found that the notes were protected by the work-product doctrine because they contained “information gathered with an eye toward litigation by the client himself.” However, in looking at the Sporck Test, the court found that the attorney-client privilege and work-product doctrine were waived when the witness used the notes to refresh his recollection. Specifically, the witness stated that he read his notes the day prior to his deposition, and he answered affirmatively that the notes refreshed his recollection as to what the parties talked about at those meetings. The court also noted that his statements showed that his testimony was affected by his review of the notes the day before. The court further found that it was in the interests of justice for the defendants to have the opportunity to inspect the notes to determine if there are discrepancies between the notes and the witness’s testimony. Finally, the court determined that the notes did not contain pure mental impressions or conclusions, so redaction was not required prior to inspection by the defendants.

Core Bore, LLC et al. v. Martell Electric, LLC (Granting the defendant’s motion to stay). In 2019, the U.S. Government awarded a contract to BFBC, LLC (“BFBC”) to construct portions of a border wall along the United States/Mexico border. BFBC then entered into two general contracts in 2019 and 2020 with the defendant to perform border wall construction in portions of California and Arizona. The defendant subsequently entered into two subcontracts with the plaintiff to perform some of the work under the general contracts. In May 2021, following a change in administration from President Trump to President Biden, the U.S. Government ordered work on the border wall to cease, and the work under the general contracts and subcontracts was terminated. The plaintiff submitted its “close out” claims (i.e., claims for materials or other things that were provided after notice of termination was provided), along with other invoices, to the defendant which in turn submitted them to the U.S. Government for payment.

After the defendant failed to pay, the plaintiff filed suit, alleging that it had completed the work pursuant to the subcontracts, that the U.S. Government fully paid the defendant for the work performed by the plaintiff, and that the defendant was owed an outstanding principal balance of $2.3 million. The defendant then filed a motion to stay based on the terms of the subcontracts. The subcontracts provided the following:

If [the plaintiff] has damages or a claim against [the defendant] which is only partially covered by the “Pass Through” disputes clause, then any lawsuit or arbitration brought by [the plaintiff] shall, in [the defendant’s] discretion, be stayed until the “Pass Through” portion of the claim is finally determined.

The subcontracts defined a “Pass Through” claim as

any damages or claims which arise from or relate to any directive, interference, rejections of work, breach of express or implied warranty, failure of payment, termination, or other act, failure to act, or conduct by [BFBC], [BFBC’s] separate contractors, or another third party[.]

The defendant asserted that it had presented the plaintiff’s claims to the U.S. Government for payment but had not yet received payment in full for the “close out” claims or for other work performed by the plaintiff. In response to the defendant’s motion to stay, the plaintiff noted that they would amend their complaint to withdraw their claim for the “close out” expenses.

The court noted that even if the plaintiff amended their complaint, it would not change the fact that there were unresolved pending claims given that the defendant’s receipt of payment from BFBC was an express condition precedent to the defendant’s obligation to pay the plaintiff. Because the defendant had not received final payment from BFBC for the plaintiff’s work, a portion of the claims were still covered by the “Pass Through” provision. Thus, the court held that the subcontracts gave the defendant the contractual right in the defendant’s discretion to stay the case. Under Indiana law, a trial court’s decision to stay civil proceedings is discretionary and may occur when the “interest of justice” requires such action. However, the court found that a stay in perpetuity would not be in the “interest of justice.” The court therefore granted a six-month stay and set a mediation deadline prior to the expiration of the stay.

McLaughlin Real Estate Indiana, LLC v. LCI Construction, Inc. d/b/a Leatherman Construction (Transferring venue) and Seaside Ice, LLC d/b/a Ice America v. Town of Zionsville, et al. (Denying the defendant’s motion to transfer venue). These two decisions are addressed together because they examine the extent to which Indiana statutes, Trial Rules, and Commercial Court Rules identify when a county with a Commercial Court may be considered a “preferred venue.” This is particularly relevant given that Commercial Courts exist in only 10 of Indiana’s 92 counties. To identify when a county may be considered a preferred venue county, Trial Rule 75(A) lists ten categories of preferred venue. The most relevant category here is “the county where a claim in the plaintiff’s complaint may be commenced under any statute recognizing or creating a special or general remedy or proceeding.” See Trial Rule 75(A)(8). Ind. Code § 23-0.5-8-3 (“the Commercial Court venue statute”) provides that “[n]otwithstanding any law that requires that a case must be filed in a specific court, a case, if otherwise eligible, may also be filed in or transferred to a business or commercial court or docket established or designated by law or supreme court rule.”

In McLaughlin, the Allen County Commercial Court held that the mere fact that Allen County had a Commercial Court did not provide for preferred venue in Allen County for a case that was previously assigned to the Commercial Court docket. There, the plaintiff filed its complaint in Allen County, along with a Notice Identifying Commercial Court Docket Case. The defendant subsequently filed its motion to dismiss, along with a Notice of Refusal to Consent to Commercial Court Docket. The court then issued an order removing the case from its Commercial Court Docket, pursuant to Ind. Comm. Court Rule 4(D) which provides that “if a Refusal Notice is timely filed, the clerk shall transfer and assign the case to the non-Commercial Court Docket of the Commercial Court Judge.” A dispute then arose as to whether there was preferred venue in Allen County. The defendant asserted that preferred venue was in Noble County, not Allen County, based on the allegations of the complaint. The plaintiff argued that reading Commercial Court Rule 4(D) in conjunction with Trial Rule 75(A)(8) and Ind. Code § 23-0.5-8-3 required the case to remain on the non-Commercial Court Docket of the Commercial Court judge. The court noted that this appeared to be an issue of first impression, and noted that, taken together, the rules and statute might appear to create preferred venue in any county in Indiana that has a Commercial Court. However, the court rejected such an interpretation of the interplay between the rules and statute, finding that the statute’s phrase “any law that requires a case must be filed in a specific court” did not encompass the trial rule’s preferred venue scheme because the rule did not “require” a case to be filed anywhere. The trial rule merely provided venue options, not requirements. Further, the court noted that the statute was enacted so that commercial court cases that were previously filed in a county’s circuit court, could be filed in that county’s superior court, and vice-versa. There was no indication of legislative intent to create preferred venue for Commercial Court cases in any of the ten counties that had a Commercial Court. Thus, the court concluded that Allen County was not a county of preferred venue, and transferred the case to Noble County, which had preferred venue.

In contrast, the Marion County Superior Court in Seaside held that there was preferred venue in Marion County for a case that was permanently assigned to the Commercial Court docket. In Seaside, the plaintiff filed its complaint in Marion County, along with a Notice Identifying Commercial Court Docket Case. The defendant subsequently filed its motion to dismiss or transfer to Boone County but did not file a Notice of Refusal to Consent to Commercial Court Docket. The plaintiff thereafter filed an objection to the defendant’s motion, along with a motion for permanent assignment to the Commercial Court docket. The defendant asserted that proper preferred venue was in Boone County, not Marion County, because the defendant’s principal office was in Boone County, and the complaint failed to include any operative facts that would establish preferred venue in Marion County under the categories set forth in Trial Rule 75(A). In response, the plaintiff argued that Marion County was a preferred venue because the case was filed in Commercial Court and was “commenced under [a] statute recognizing … a special or general … proceeding.” See Trial Rule 75(A)(8); Ind. Code § 23-0.5-8-3. As a threshold matter, the court found that the case should be permanently assigned to the Commercial Court docket under Ind. Comm. Ct. Rule 4(D)(2) because the defendant did not file a Notice of Refusal. The court then determined that Marion County was indeed a preferred venue under Trial Rule 75(A)(8) because the case had been permanently assigned to the Commercial Court docket and Indiana statutes provided that the Commercial Court in Marion could oversee such a proceeding. Because Marion County was a preferred venue, the court could not transfer the case to Boone County, even if it was also a preferred venue. Further, the court noted that the case could not remain on a Commercial Court docket and be transferred to Boone County because a Commercial Court does not exist in Boone County.

Thus, the differing outcome between the two decisions appears based on a key factual distinction, i.e., that McLaughlin was no longer assigned to the Commercial Court docket after the defendant filed a Notice of Refusal to Consent to the Commercial Court Docket while Seaside remained permanently assigned to the Commercial Court docket after the defendant failed to file a Notice of Refusal. However, it is possible that a future decision could differ from these decisions and find that preferred venue does exist in a county with a Commercial Court, even if the case has been re-assigned from a Commercial Court judge’s Commercial Court docket to his non-Commercial Court docket, because the case was initially filed on the Commercial Court docket. See Ind. Comm. Ct. Rule 4(D)(3); Ind. Trial Rule 75(A)(8); Ind. Code § 23-0.5-8-3. Hopefully, this lack of ambiguity will be resolved by Indiana’s appellate courts, or by a clarification of Indiana’s Trial and Commercial Court rules.

§ 2.3.5 Iowa Business Specialty Court

Southern Disaster Recovery, LLC v. City of Marion, Iowa (Public improvement contract, attorneys’ fees, interest). After Iowa’s 2020 derecho, Plaintiff Southern Disaster Recovery, LLC (“SDR”) contracted with Defendant City of Marion (“City”) to remove debris from waterways. SDR conducted the work, but the City withheld payment of SDR’s later invoices in the amount of $4,928,993.28. SDR filed suit against the City for failure to pay the outstanding invoices pursuant to its contract. SDR also asserted a claim for attorneys’ fees and expenses under Chapter 573 of the Iowa Code, which governs public improvements, and later added a claim for alleged false reporting by the City to law enforcement under Iowa Code § 708.7(7). Shortly before trial, the City paid SDR’s outstanding invoices in full. The parties submitted SDR’s false reporting claim to the jury, and after seven trial days, the jury returned a verdict for the City. The parties then submitted SDR’s claim for attorneys’ fees to the court. SDR also argued it was entitled to interest in the amount of $377,502.70 under Iowa Code Chapter 535 because the City refused to pay the invoices for more than a year and a half.

The court rejected SDR’s attorneys’ fees claim under Chapter 573 but granted SDR’s interest claim under Chapter 535. The court concluded that Chapter 573 was inapplicable to the case because the contract between the parties was not a public improvement contract. The court explained that under Chapter 573, “public improvement” required work related to construction, and SDR did not build, or claim to demolish, anything in connection with the services it provided to the City. However, the court granted SDR’s claim for interest on the invoices pursuant to Iowa Code § 535.2 because the contract provided that the City and its debris monitoring agent would exercise their discretion in determining what debris SDR removed. Although the court recognized the City’s concerns with possible ineligible debris removal, the City’s debris monitor oversaw all the work of SDR and approved every invoice. The court thus concluded that the City did not have a good faith basis for disputing the amount of SDR’s invoices and awarded interest on the unpaid invoices.

§ 2.3.6 Maine Business and Consumer Docket

Desjardin v. Wirchak (Order denying individual defendants’ motion to dismiss). This BCD case centered around claims against individual hospital employees (the “Individual Defendants”) and the hospital itself (the “Hospital Defendants”) for inappropriate and unlawful access to patient medical records. The question presented by the Individual Defendants’ motion to dismiss was whether a hospital patient whose electronic medical record was repeatedly accessed, viewed, and misappropriated for illegitimate reasons by prying unauthorized hospital employees during the nine months of her pregnancy and beyond could bring a claim against the employees without first going through the medical malpractice pre-litigation screening panel.

Plaintiff had been in a contentious relationship with one of the Individual Defendants from 2020 through 2021, and learned that she was pregnant with his child, which he denied. That Individual Defendant was employed by the Hospital Defendants, as was his mother, both as non-clinical, administrative employees. During Plaintiff’s prenatal, labor and delivery, and postpartum care through the Hospital Defendants, the Individual Defendants either accessed directly or directed other Hospital employees to access Plaintiff’s health care information and protected health information via Plaintiff’s electronic medical records, without her knowledge or consent. Eventually, in late 2021, Plaintiff received an anonymous message notifying her that the Individual Defendants had accessed her medical record. After Plaintiff’s report, the Hospital Defendants commenced an investigation and found that Plaintiff’s records had been inappropriately accessed, but did not take any action against the Individual Defendants, and did not take any effective steps to protect Plaintiff’s private healthcare information. The unauthorized access continued, and Plaintiff was anonymously alerted a second time.

In May of 2023, Plaintiff filed a seven-count complaint, including claims for Invasion of Privacy, Unlawful Disclosure of Health Care Information under 22 M.R.S. § 1711-C(13)(B), and Intentional Infliction of Emotional Distress. The Individual Defendants filed a Motion to Dismiss all claims against them for lack of subject matter jurisdiction, on the grounds that Plaintiff did not comply with the Maine Health Security Act (“MHSA”), 24 M.R.S. §§ 2501-2988 (2023), because Plaintiff’s allegations arose from professional negligence and therefore should have been brought pursuant to the MHSA.

The court denied the Individual Defendants’ Motion to Dismiss in the grounds that the “MHSA was enacted to regulate the medical malpractice insurance industry in response to the rising insurance costs against health care providers - not to create procedural hurdles for every claim against or involving the medical field.” As a result, despite the breadth of the MHSA, health care services under the MHSA are defined as “acts of diagnosis, treatment, medical evaluation or advice or such other acts as may be permissible under the health care licensing, certification or registration laws of this State.” In this case, the Individual Defendants did not have a work-related reason for accessing Plaintiff’s medical records and personal health information, were not providing health care services, and were not performing related activities such as billing, scheduling, or other legitimate activities. The court stated: “The conduct of a hospital employee accessing a patient’s confidential information for illegitimate purposes like snooping or spying is no more providing a health care service subject to the MHSA than if a health care practitioner ran over her own patient in the hospital parking lot.” Thus, since Plaintiff’s claims against the Individual Defendants did not arise out of the provision or failure to provide health care services, she was not first required to submit her claims to a prelitigation screening panel pursuant to the MHSA.

§ 2.3.7 Maryland Business and Technology Courts

Wilber v. Feldman (The nature of the action brought by plaintiffs in breach of fiduciary claims determines whether it is a derivative or direct claim, not the label given to the claim by the plaintiffs). In September 2020, the Board of Directors (“Board”) of Resource Real Estate Opportunity REIT Inc. (“REIT I”), a Maryland real estate investment trust, approved an internalization transaction to internalize its management functions (“Self-Management Transaction”) and then later merged with and into Resource Real Estate Opportunity REIT II Inc. (“REIT II”), another Maryland real estate investment trust (“Merger Transaction”). The newly merged company (the “Company”) also later acquired Resource Apartment REIT III, Inc. (“REIT III”), another Maryland real estate investment trust. In June 2021, Plaintiffs delivered a stockholder demand letter to the Board in which they alleged breaches of fiduciary duties by the Board in the Self-Management Transaction and the Merger Transaction. After receiving the demand letter, the Board formed a Special Litigation Committee (“SLC”) and delegated to the SLC the ability to investigate and make a determination regarding how the Company should respond to the demand letter. The SLC engaged separate independent counsel, investigated Plaintiffs’ claims in the demand letter and determined on January 23, 2022, that the claims had no merit. During the pendency of the SLC investigation, the Company’s management met with several financial advisors in September 2021 to discuss potentially listing the Company’s common stock or sale of the Company. Ultimately, after running its process, Blackstone Real Estate Income Trust Inc. became the successful bidder to acquire the Company through the use of a cash-out merger at the price of $14.75 per share and closed on the transaction in May 2022 (the “BREIT Transaction”). Plaintiffs filed a class action complaint against the Board in February 2022 alleging that the directors of the Board breached their fiduciary duties and were unjustly enriched to the detriment of stockholders when the Company completed the Self-Management Transaction, the Merger Transaction, and BREIT Transaction. The defendant directors moved to dismiss Plaintiffs’ complaint.

The court held that Plaintiffs’ claims for breach of fiduciary duty and unjust enrichment as to the Self-Management Transaction and the Merger Transaction were derivative claims that could not be maintained because Plaintiffs were no longer stockholders. In reaching this conclusion, the court looked to the language of the Plaintiffs’ complaint and the demand letter, which both asserted damages to the Company rather than articulated how the Plaintiffs were distinctly and separately harmed. The court rejected Plaintiffs’ contention that share dilution caused individual harm that would render their claims direct claims instead of derivative claims. In concluding that the Plaintiffs’ derivative claims failed, the court noted that a plaintiff must continuously own shares in the company to maintain a derivative action. However, a plaintiff may be able to bring a derivative action if its ownership of shares is terminated by a merger and it shows that the board pursued the merger fraudulently and merely to preclude a derivative action. Because Plaintiffs had not alleged that the Board pursued the Merger Transaction fraudulently and with the purpose of avoiding a derivative action, the court held that Plaintiffs were unable to maintain the derivative claims. Noting that the SLC was composed of independent and disinterest directors that were newly added to create the SLC, the SLC’s use of independent counsel and extensive investigation that was not restrained by the Board in making its determinations, the court found Plaintiffs’ claims to also fail because the business judgment rule applied to the SLC’s rejection of Plaintiffs’ demand letter. Furthermore, the court held that Plaintiffs’ breach of duty claim as to the BREIT Transaction was not actionable because defendant directors were fully transparent in the proxy material pertaining to the sale and the sale was ratified by informed stockholders of the Company and found the inclusion of immunity for the Board through broad indemnification rights in the BREIT Transaction failed to establish that the directors engaged in self-dealing.

Whitlow v. Bowser (Claims for breach of fiduciary duty in connection with a transaction are foreclosed when the transaction is approved by the requisite vote of informed and disinterested stockholders). In a class action, Plaintiffs alleged that the directors of the board of directors (the “Directors”) of Columbia Property Trust Inc. (“Columbia”) breached their fiduciary duties of good faith and loyalty by allegedly choosing to merge with Pacific Investment Management Company LLC (the “Merger”) to appease an activist investor to the detriment of Columbia’s stockholders and through the Directors’ receipt of an improper benefit resulting from the Directors’ receipt of “easy liquidity” and reputation protection. Plaintiffs further alleged the Directors breached their duty of disclosure by withholding information about the proposed Merger to the stockholders, thus preventing stockholders from evaluating the necessary information to make an informed decision regarding the Merger. Defendant Directors moved to dismiss. The court granted Defendants’ motion to dismiss.

The court held that the business judgment rule applied to the Board’s decision to enter into and consummate the Merger, found that Plaintiffs’ allegations that an activist stockholder threatening a proxy fight bullied Defendants into a merger to protect their reputation and avoid a proxy contest were speculative and were insufficient to overcome the presumption that the actions of the Directors were in the best interest of Columbia—especially considering the extensive efforts Columbia and the Directors took in the review process and its consultation with independent legal counsel as well as financial advisors. The court further held that Plaintiffs’ claims also failed because the stockholders voted in favor of the Merger and therefore, even if Plaintiffs presented a sufficient claim for breach of fiduciary duty arising from the Merger, those claims became foreclosed when a majority of informed and disinterested stockholders voted to ratify the Merger. In considering a violation of the duty of disclosure, the court noted that a materiality standard is applied when determining the scope of information that must be disclosed to stockholders prior to a merger, such that an omitted fact is only considered material if there is a substantial likelihood that a reasonable stockholder would consider it important in deciding how to vote. Thus, a plaintiff must explain how omitted information would have altered a stockholder’s vote. In dismissing Plaintiffs’ disclosure allegations, the court considered the extent of information that was given to the stockholders and ultimately found Plaintiffs’ disclosure claims to be speculative and insufficient and to not state how or why the allegedly undisclosed information was in fact material. Finally, the court held that Plaintiffs’ claims were also barred by the exculpatory provision in Columbia’s charter, which provided that no director or officer of Columbia would be liable to stockholders for money damages. Under Maryland law, for claims to survive such an exculpatory provision, a plaintiff must show that the officer or director received an improper benefit or engaged in active or deliberate dishonesty. In dismissing this claim, the court found that Plaintiffs’ claims that the Merger provided Defendants with “easy liquidity” and protected their reputations were not sufficient to demonstrate the receipt of an improper benefit and Plaintiff provided no facts showing that Defendants engaged in active and deliberate dishonesty.

Shareholder Representative Services, LLC v. Columbia Care Inc. (Motion to Dismiss Granted due to Failure to establish personal jurisdiction, standing, and to plead facts sufficient to establish fraud). Shareholder Representative Services, LLC, on behalf of former securityholders of Green Leaf Medical LLC (“Green Leaf”), sued Columbia Care Inc. (“Columbia Care”), Kroll Inc. (“Kroll”), and Columbia Care’s Chief Financial Officer, Chief Executive Officer, and Executive Chairman of Board of Directors (collectively the “Individual Defendants”) alleging that Defendants fraudulently deprived the former securityholders of milestone payments totaling more than $72 million that they would be entitled to receive as a result of Green Leaf achieving certain performance metrics after being acquired by, and becoming a subsidiary of Columbia Care pursuant to a merger entered into in December 2020. Plaintiff alleged that the Individual Defendants were instrumental in an effort to defraud them and that the Individual Defendants retained Defendant Kroll, who provided accounting services that improperly deflated the performance results of Green Leaf. Plaintiff further alleged that Columbia Care and its Chief Executive Officer made fraudulent or negligent misrepresentations regarding a litigation matter that was pending against Columbia Care prior to the merger. Defendants moved to dismiss the Plaintiff’s claims. The court ultimately granted the Defendants’ motions to dismiss.

First, the court explained that despite the lengthy nature of the Plaintiff’s complaint, the Plaintiff failed to establish that the court had personal jurisdiction over any of the Defendants due to none of the Defendants having enough contacts and/or soliciting business in the State of Maryland sufficient to establish personal jurisdiction. Next, the court explained that Plaintiff failed to establish standing to bring claims alleging breach of fiduciary duties due to those claims only being claims that can be brought by the securityholders themselves and not the Plaintiff. Additionally, the court noted that the assignment document that required the Plaintiff to distribute any proceeds received from the litigation was insufficient to actually assign the right of the former securityholders of Green Leaf to bring derivative or direct claims resulting from the merger transaction. The court also dismissed Plaintiff’s fraud and intentional misrepresentation claims against Columbia Care and its Chief Executive Officer. Despite Plaintiff’s allegations that Columbia Care failed to identify pending litigation and the Chief Executive Officer’s characterization of the pending litigation as immaterial, the court found that the allegations on their own were insufficient to maintain a claim for fraudulent misrepresentation. The Plaintiff failed to allege facts to indicate that the Individual Defendants knew of the falsity of their statements, made such statements with the intent to deceive, or that the former securityholders relied on those statements to enter into the Merger Agreement with Columbia Care. The court further held that Plaintiff’s claim against Columbia Care and its Chief Executive Officer for negligent misrepresentation were contractually waived by the exclusive remedy clause in the Merger Agreement, leaving indemnification as the sole remedy available. The court also dismissed the claim of breach of fiduciary duty against the Defendants on the basis that officers and directors owe no duty directly to shareholders. Finally, the court dismissed claims for tortious interference against the Individual Defendants and Kroll. In reaching this decision, the court noted that officers and directors cannot be held liable for intentional interference with contractual relations and, therefore, the Individual Defendants cannot interfere with a contract concerning their own company. As to Kroll, the court held that a conclusory allegation that a party was aware of the existence of a contract was insufficient to support a claim for tortious interference.

§ 2.3.8 Massachusetts Business Litigation Session

Adelman v. Proskauer Rose LLP (legal malpractice, superseding causation). Dr. Robert Adelman retained Proskauer Rose LLP (“Proskauer”) to prepare contract documents that would effectuate a hedge fund spin-off from the life sciences investment firm he had helped found. The contract documents Proskauer prepared included a provision that allowed the new hedge fund’s manager to redeem Dr. Adelman’s interests in the fund and its profits if the hedge fund manager carried out certain permitted transactions. The hedge fund manager took advantage of the provision and engaged in certain strategic transactions that stripped Dr. Adelman of his economic interests. Dr. Adelman brought a legal malpractice claim against Proskauer, alleging that the firm had negligently copied and pasted the referenced provision from a prior contract it had worked on. He sought $636 million in damages.

At summary judgment, Proskauer conceded a triable issue as to whether it breached the standard of care by including the provision at issue. It contended, however, that the hedge fund manager had himself breached other contractual provisions and his fiduciary duty to Dr. Adelman, and that each of those breaches severed the chain of causation between its conduct and Dr. Adelman’s injury. The court disagreed, denying Proskauer’s motion for summary judgment and finding that the contractual breaches invoked by Proskauer were irrelevant; the contracting parties had agreed that the hedge fund manager did not owe Dr. Adelman any fiduciary duty; Proskauer had failed to show the hedge fund manager’s conduct was an unforeseeable superseding cause of the harm; the record supported a finding that Proskauer’s negligence caused the loss of Dr. Adelman’s share of future hedge fund profits; and Dr. Adelman had standing to sue for the loss of his right to share in those profits.

On the superseding causation issue, the court explained that, in a legal malpractice case, intervening events or conduct by a third party may relieve a defendant of liability only where the intervening events or conduct (i) occurred after the original negligence; (ii) were not the consequence of the attorney’s negligence; (3) created a result that would not otherwise have followed from the original negligence; and (4) were not reasonably foreseeable. Where the intervening cause was reasonably foreseeable and the attorney could have taken reasonable steps to mitigate the harm, the intervening cause is simply a “concurring cause.” Accordingly, even if the hedge fund manager had breached material portions of the agreement (which he did not), that would still not be a superseding cause that absolved Proskauer of liability. The record suggested that the hedge fund manager would not have been able to redeem Dr. Adelman’s interest but for Proskauer’s alleged negligence. It was foreseeable that, once Proskauer drafted the agreement to let the hedge fund manager engage in the underlying transaction without Dr. Adelman’s consent, then Dr. Adelman would have trouble collecting his share of the consideration from the hedge fund manager. A jury could reasonably find that Proskauer could have protected Dr. Adelman from this risk by, for example, not including the strategic transaction provision in the agreement.

Alves v. BJ’s Wholesale Club, Inc. (electronic data collection, wiretapping). Alves is one of a number of decisions issued by the Business Litigation Session in 2023 related to whether certain internet tracking technologies violate the Massachusetts Wiretap Statute, G.L. c. 272, § 99 (“Wiretap Statute”). Here, the court considered, and ultimately denied, a motion to dismiss a class action complaint challenging BJ’s Wholesale Club, Inc.’s (“BJ’s”) use of “Session Replay Code” (“SRC”) to record visitors’ activities on its website. SRC is computer code that enables website operators to record, save, and replay visitors’ interactions with a website—including mouse clicks, scrolls, zooms, keystrokes, and text entries. SRC recordings are not necessarily anonymized, and personally identifiable information typed by a website visitor may be captured. The Alves plaintiff alleged that BJ’s use of SRC violated both the Wiretap Statute and the Massachusetts statute governing invasion of privacy, G.L c. 214, § 1B. BJ’s moved to dismiss all claims, arguing with respect to the Wiretap Statute that the plaintiff (i) failed to plausibly allege that BJ’s conduct concerned wire communications and (ii) failed to plausibly allege that the conduct amounted to an interception within the meaning of the statute. The court rejected each argument in turn.

A “wire communication” is defined in the Wiretap Statute as “any communication made in whole or in part through the use of facilities for the transmission of communications by the aid of wire, cable, or other like connection between the point of origin and the point of reception.” G.L. c. 272, § 99(B)(1). BJ’s asserted that the plaintiff’s claims did not implicate “wire communications” because the activities tracked by its SRC (i) were not “communications” and (ii) did not involve the use of a wire, cable, or other like connection. The court disagreed. Citing to the dictionary definition of “communication,” the court found that the mouse movements, clicks, and keystrokes recorded by BJ’s SRC may properly be considered an exchange of information between the website owner and the website user. The court further rejected BJ’s contention that an Internet-based communication does not occur by wire, reasoning that internet technology is rooted in telephone infrastructure.

BJ’s arguments as to the absence of an “interception” likewise failed. As defined in the statute, “interception” means to “secretly hear, secretly record, or aid another to secretly hear or secretly record the contents of any wire or oral communication through the use of any intercepting device by any person other than a person given prior authority by all parties to such communication.” G.L. c. 272, § 99(B)(4). BJ’s argued that, even if these were wire communications, the plaintiff’s claims still failed because he did not allege that the contents of any wire communication were recorded. BJ’s further argued that the plaintiff failed to plausibly allege that SRC is an intercepting device. Citing the breadth of the statutory language, the court found that keystrokes, clicks, mouse movements, and other data constitute recorded “contents” within the meaning of the statute. The court further rejected BJ’s claims that SRC is not a “device” or “apparatus,” and declined to find that SRC falls within the so-called “telephone equipment exception.” The court found the case law cited by BJ’s to be distinguishable based on the degree of invasion involved, and concluded that SRC’s characteristics are “quite different” from telephone equipment. Finally, the court refused to dismiss the plaintiff’s invasion of privacy claim on the grounds that (i) whether an intrusion transgresses the privacy statute is a fact question not resolvable on a motion to dismiss; (ii) the standards for acceptable data collection on the internet are evolving; and (iii) the scope of discovery would not change if the invasion of privacy claim remained.

JFF Cecilia LLC v. Weiner Ventures LLC (spoliation, sanctions). Read together, these decisions (i) clarify the legal standard in Massachusetts for when the duty to preserve evidence begins and (ii) explain when sanctions may be imposed for spoliation of evidence. The plaintiffs in JFF Cecilia LLC moved for sanctions based on the defendants’ deletion of various emails and texts after they had been provided with formal written notice of a contract dispute between the parties. The notice was provided on August 20, 2019. In the days that followed, however, multiple attorneys communicated that the notice was not meant to serve as a precursor to litigation. Then, on October 1, 2019, counsel for the plaintiffs sent a settlement offer that threatened recovery through “other mechanisms” if the offer was not accepted. Shortly thereafter, one of the defendants performed a factory reset of his cell phone, permanently destroying any electronic evidence that might otherwise have been recoverable. The defendants also continued their practice of deleting old texts and emails until October 23, 2019.

In its initial decision, the court denied the plaintiffs’ motion for sanctions on the grounds that the defendants would not reasonably have expected to be sued until October 1, 2019, and that the plaintiffs failed to show they suffered any prejudice from spoliation that occurred between October 1 and October 23, 2019. The court reasoned that the duty to preserve evidence arises once litigation becomes “probable” and “not merely possible.” Here, litigation became “probable” upon the defendants’ receipt of the October 1 settlement offer, at which point any reasonable person would have understood there to be a clear threat of litigation.

On appeal, a single justice held that the lower court had applied the wrong legal standard and remanded with an order that the court “determine if the defendants knew or reasonably should have known that evidence might have been relevant to a possible action.” On remand, the lower court stated that it understood the phrase “possible action” to mean something materially different than “likely” litigation. It concluded that a future lawsuit is “possible” if it is within the limits of ability, capacity, or realization but “likely” only if it has a high probability of occurring. Under this standard, sanctions were warranted based on the defendants’ spoliation of evidence after their receipt of the August 20, 2019, notice. Because the plaintiffs were prejudiced by the destruction of evidence during this time period, the court held that the plaintiffs would be permitted to offer evidence of the spoliation at trial and found that the jury should be instructed as to an unfavorable inference against the defendants regarding the contents of the deleted messages.

§ 2.3.9 Michigan Business Courts

Thomas A. Robinson and The Mack Shop, LLC v. Gretchen C. Valade Revocable Living Trust (Arbitration, deadlock, dissolution, operating agreements). In 2012, Plaintiff Thomas Robinson established Plaintiff The Mack Shop, LLC with Gretchen Valade. Robinson and Valade were 50/50 owners and co-managers of the company. The company owned a commercial building, of which Valade occupied 20% and Robinson occupied 80%. Each paid below-market rent of $1,000 per month and shared the building’s operating expenses. Nearly a decade later, Valade transferred her interest in the company to the Defendant Trust and granted authorization to her son and to her business representative to manage the company on behalf of the trust. At that time, Valade also relinquished her tenancy and leased her 20% of the building to a third party, who continued to pay the $1,000 rental rate.

Then, in December 2021, the trust’s representatives called a member/manager meeting and submitted two resolutions, one that would require the company to increase its rental rates for both tenants and another that would require the company to sell the building before March 2022. Robinson voted against both resolutions, prompting the trust to submit a third resolution to dissolve the company. Robinson voted against this resolution as well. Consequently, the trust filed a demand for arbitration claiming that the members were at an impasse and seeking dissolution pursuant to Michigan’s LLC Act. Robinson countered that the company had operated the same way for a decade, and that so long as it maintained its historical operations, there was no deadlock. The arbitrator agreed with the trust and ordered a dissolution.

Robinson and the company filed a complaint in the Wayne County Business Court seeking to vacate the arbitrator’s ruling. The trust moved to dismiss and to confirm the award. Robinson argued that the arbitrator erred by applying the LLC Act’s dissolution provision instead of a provision in the company’s operating agreement that prohibited the company’s members from seeking to “compel dissolution of the company, even if such power is otherwise conferred by law.” Given the conflict between the provision and the statute, the court considered the question of which should prevail. After reviewing the caselaw and the particulars of the case, the court agreed with the arbitrator’s harmonization of the statute and the operating agreement and found that the statute permits dissolution where, as here, an operating agreement has no mechanism for resolving an impasse. Thus, the court upheld the arbitration award.

Graczyk Holdings, LLC, Offshore Spars Co., and Eric Graczyk v. Steven King (Breach of contract; fraud; economic loss doctrine). In September 2021, Plaintiff Eric Graczyk and Defendant Steven King executed a letter of intent (“LOI”) for Graczyk’s company, Graczyk Holdings (“GH”), to purchase King’s company, Offshore Spars (“Offshore”) The LOI provided for due diligence review by Graczyk and required King to make disclosures concerning Offshore’s finances and operations. In December 2021, Graczyk and King executed a stock purchase agreement (“SPA”) by which GH purchased all of Offshore’s shares for $3,000,000. The SPA required King and Offshore to make further disclosures to GH. The sale closed in January 2022, and was financed by a bank loan, two promissory notes, and a personal guaranty from Graczyk.

Plaintiffs alleged that just months after closing, they discovered that King made multiple misrepresentations and omissions during the LOI’s due diligence and disclosure period and breached the representations and warranties he made during that period. Plaintiffs further alleged that King made multiple misrepresentations and omissions in the SPA’s required disclosures. Plaintiffs sued in the Macomb County Business Court, raising claims for breach of contract and unjust enrichment as well as multiple fraud claims, including misrepresentation, silent fraud, and fraudulent inducement. King moved to dismiss all of Plaintiffs’ claims, which the court granted for the fraud claims only.

The court first considered King’s arguments based on the economic loss doctrine, which precludes tort claims based on a breach of a duty arising out of a contractual obligation. The court found that Plaintiffs’ misrepresentation and silent fraud allegations (such as the claim that King “falsely represented that all disclosures required under the [SPA] were fully, accurately, and completely made”) related directly to King’s disclosure obligations under the SPA, and in fact were the same allegations underlying Plaintiffs’ breach of contract claims. The court rejected Plaintiffs’ argument that the SPA’s indemnification provision excepted fraud and thus created a carve-out for the doctrine. The court stated that allowing parties to contract around the doctrine would undermine its purpose to keep contract and tort law distinct. Furthermore, the court rejected Plaintiffs’ assertion that their fraudulent inducement claim is exempt from the economic loss doctrine. The court stated that while there is an exemption for inducement claims relating to fraud extraneous to the contract, Plaintiffs’ inducement claims all concerned King’s performance of the contract. Accordingly, the court held that Plaintiffs’ fraud claims were barred by the economic loss doctrine.

Pinnacle North, LLC v Keith A. White (Voidable transactions, capital contributions, distributions). Non-party Marketplace Home Mortgage, LLC (“MHM”) leased office space from Plaintiff. In October 2019, Plaintiff obtained a default judgment against MHM of approximately $53,000, plus interest, costs, and attorneys’ fees. Plaintiff was unable to collect on the judgment, and brought a subsequent suit in the Oakland County Business Court against Defendant’s former owner, seeking to pierce the corporate veil and recover the default judgment. The matter went to a bench trial, where the central dispute was the characterization of a $50,000 payment Defendant made from MHM to himself in December 2019. If the payment was a distribution to Defendant, then it would be a voidable transfer under the Voidable Transactions Act that Plaintiff could collect to satisfy the judgment; but if it was a loan repayment as Defendant contended, then it would not be a transfer under the Act and therefore would not be collectible.

The court first considered whether Defendant had made any loan to MHM at all. Defendant claimed to have deposited $275,000 in order to use a line of credit for the company and claimed that this deposit was a loan to the company. However, the deposit was characterized differently on different documents: MHM’s books and records showed it as a capital contribution made on November 30, 2018; a separate loan document and security agreement showed it as a loan made on December 3, 2018; tax documents did not show it as a liability; and MHM’s balance sheet did not show it as a loan. Defendant, for his part, testified that the deposit was both a loan and a capital contribution. The court did not find Defendant credible and found that the books and records unambiguously proved the $275,000 deposit to be a capital contribution.

Turning to the $50,000 payment, the court found that it was a distribution from MHM to Defendant, and not a repayment of the alleged loan, because the check: (1) was made to MHM’s sole owner; (2) was made at the end of the year; (3) did not identify any consideration; (4) did not correspond to any loan schedule; (5) did not correspond to any loans on MHM’s books; (6) had no description of the payment; and (7) was shown on MHM’s books as a return of a capital contribution. Additionally, Defendant had sworn to the IRS that there were no outstanding loans from MHM officers. Accordingly, the payment was a distribution, and because it was made after Plaintiff’s claim against MHM and while MHM was insolvent, it was voidable under the Voidable Transactions Act. The court found Defendant responsible for the entirety of Plaintiff’s default judgment against MHM, including nearly $70,000 in attorneys’ fees pursuant to the underlying contract.

Fastenal Company v. Kurt Patrick Gross and Hi-Tech Fasteners, LLC (Noncompete, trade secrets, preliminary injunctions). Defendant Kurt Gross was an employee of Plaintiff Fastenal Company. Gross had a confidentiality and noncompetition agreement that prohibited Gross from soliciting Fastenal’s customers for a year after leaving Fastenel’s employ. On June 3, 2022, Gross resigned from Fastenal. On that same day, Gross began employment with Defendant Hi-Tech Fasteners, LLC, a competitor of Fastenol. Upon exiting Fastenal, Gross emailed to himself a “rolodex” spreadsheet listing Fastenal customers and confidential customer information. Fastenal alleged that while at Hi-Tech, Gross used his connections with Fastenal’s customers and Fastenal’s confidential customer information to solicit numerous Fastenal customers to buy parts from Hi-Tech, and that Hi-Tech could not have secured those customers without Fastenal’s proprietary and confidential information. Believing Gross breached his agreement, Fastenal filed suit in the Ottawa County Business Court, alleging breach of the confidentiality and noncompetition agreement, misappropriation of trade secrets, and tortious interference. Fastenal sought a preliminary injunction prohibiting Gross from failing to maintain the confidentiality of Fastenal’s customer information and from soliciting Fastenal’s customers and prohibiting Hi-Tech from causing Gross to violate the confidentiality and noncompetition agreement.

The court held an evidentiary hearing, after which it considered the traditional injunction factors. First, the court found that Fastenal showed a substantial likelihood of success on its breach of contract claim because Gross took employment with a direct competitor, emailed himself a customer list with proprietary information, and an email exchange proved at least one incident of impermissible solicitation. However, the court found that there was not a likelihood that Fastenal would succeed on its misappropriation of trade secrets claim, as Fastenal provided only speculative and circumstantial allegations of improper disclosure, which Gross denied.

Next the court stated that a breach of a noncompetition agreement can establish irreparable injury in the form of the “loss of consumer goodwill and the weakened ability to fairly compete that would result from disclosure of trade secrets and breach of a non-compete.” Gross argued that his agreement with Fastenal was not actually a noncompetition agreement because it did not totally prohibit him from working for a direct competitor, but instead prohibited him from soliciting customers and sharing information. The court disagreed, noting that the agreement’s narrow employment restrictions merely complied with Michigan’s statutory requirement that a noncompete agreement be reasonable.

The court then looked to the balance of hardships and found that while Fastenal had established it would suffer some irreparable harm, the proposed injunction would not subject Gross or Hi-Tech to comparable harm. Under the proposed injunction, Gross could still continue working at Hi-Tech, and Hi-Tech had other salespeople that are not subject to Gross’s agreement and thus could do business with Fastenal’s customers.

Finally, the court considered the public interest, and found that the public has a general interest in the courts’ enforcement of contracts, which support the legitimate business interests of all contracting parties. The court further found that the proposed injunction was a limited and reasonable restriction on Gross, who would still be able to utilize his years of experience.

Having found all of the preliminary injunction factors in Fastenal’s favor, the court issued the requested preliminary injunction pending final judgment on Fastenal’s claims.

Franks v. Franks (Shareholder oppression, business judgment rule, dividends; buyout). Plaintiffs owned 50% of the non-voting shares of Defendant Burr Oak Tool, Inc. The individual Defendants were officers and directors who made a low offer to redeem Plaintiffs’ shares, which they followed up by refusing to pay dividends despite the company having ample funds to do so. Plaintiffs brought a claim for, among other things, shareholder oppression.

A Kent County Business Court judge, sitting by designation, conducted a Zoom trial over 11 days. After trial, the court found that Defendants had committed intentional shareholder oppression and had acted in bad faith by withholding dividends, and that because of that bad faith, Defendants could not avail themselves of the protection of the business judgment rule. The court ordered four of the individual Defendants and the company to pay damages to the Plaintiffs in the form of a dividend totaling $2,100,000, including interest. However, the court declined to order a buyout, finding that because of Plaintiffs’ substantial holdings, such a remedy would have an adverse effect on the company and third parties who rely on the company. Instead, the court ordered damages and the appointment of an independent outside director, which the court believed would improve the corporate culture.

§ 2.3.10 New Hampshire Commercial Dispute Docket

Under the following case headings, you will find direct excerpts from the respective opinions of the New Hampshire Commercial Dispute Docket, featuring key language from the court’s decision.

Scott Komaridis v. Kevin D’Amelio, et al. (Minority shareholder freezeout claims). “The New Hampshire Supreme Court has not explicitly adopted the tort of corporate freezeout but has assumed its existence arguendo. See Thorndike v. Thorndike, 154 N.H. 443, 446 (2006). Another superior court, as part of the Business and Commercial Dispute Docket, ‘has previously held that if the question were squarely presented, the New Hampshire Supreme Court would find that majority shareholders owe an actionable fiduciary obligation to minority shareholders.’ Ronzio v. Tannariello, No. 226-2019-CV-00671, 2019 WL 678358, at *7 (N.H. Super. Ct. Dec. 19, 2019) (McNamara, J.); see also Meehan v. Gould, No. 218-2017-CV-1322, 2019 WL 3519455, at *5 (N.H. Super. Ct. July 31, 2019) (McNamara, J.). ‘[T]he assumed existence of the freeze-out claim under New Hampshire law is based on the existence of a fiduciary duty between shareholders in a closely held corporation.’ Ronzio v. Tannariello, No. 226-2019-CV-671, 2020 WL 13663046, at *5 (N.H. Super. Ct. Dec. 11, 2020).

“The Court finds that the nature of a member-managed LLC, perhaps the most common form of a closely held corporation, supports Plaintiff’s position. See Pointer v. Castellani, 918 N.E.2d 805, 808 (Mass. 2009) (describing an LLC as ‘a closely held corporate entity.’). ‘Only in the close corporation does the power to manage carry with it the de facto power to allocate the benefits of ownership arbitrarily among the shareholders and to discriminate against a minority whose investment is imprisoned in the enterprise.’ Meiselman v. Meiselman, 307 S.E.2d 551, 559 (N.C. 1983) (quotation omitted). The unequal power inherent in a closely held corporation leaves minority shareholders in an especially vulnerable situation because they cannot readily sell off their shares to recoup their investment. See Donahue v. Rodd Electrotype Co. of New England, Inc., 328 N.E.2d 505, 514–15 (Mass. 1975) (explaining that compared to a large public corporation where a dissatisfied shareholder could sell off shares, the minority shareholder in a closely held corporation does not have a ready market to reclaim capital). Additionally, courts’ general reluctance to become involved with business decisions of a corporation have also left minority shareholders susceptible to majority shareholders’ oppressive conduct. See id. at 513–14.”

Atlantic Anesthesia, P.A. v. Ira Lehrer, et al. (Common interest doctrine). “It is well settled that ‘[w]here legal advice of any kind is sought from a professional legal adviser in his capacity as such, the communications related to that purpose, made in confidence by the client, are at his instance permanently protected from disclosure by himself or by the legal adviser unless the protection is waived by the client or his legal representatives.’ Riddle Spring Realty Co. v. State, 107 N.H. 271, 273 (1966). The burden to prove the existence of the attorney-client relationship lies with the party asserting the privilege. McCabe v. Arcidy, 138 N.H. 20, 25 (1993).

“‘Although occasionally termed a privilege itself, the common interest doctrine is really an exception to the rule that no privilege attaches to communications between a client and an attorney in the presence of a third person.’ United States v. BDO Seidman, LLP, 492 F.3d 806, 815 (7th Cir. 2007). The common interest doctrine applies when two or more clients consult or retain the same attorney to represent them on a matter of common interest. Cavallaro v. United States, 284 F.3d 236, 249 (1st Cir. 2002). ‘In such a situation, the communications between each of them and the attorney are privileged against third parties.’ Id. ‘[T]he privilege [also] applies to communications made by the client or the client’s lawyer to a lawyer representing another in a matter of common interest.’ Id. at 249–50; see also N.H. R. Evid. 502(b) (codifying the common interest doctrine and providing that it applies to ‘confidential communications made for the purpose of facilitating the rendition of professional legal services,’ when between, inter alia, the client’s lawyer and a lawyer ‘representing another party in a pending action and concerning a matter of common interest therein.’). The doctrine ‘is not an independent basis for privilege, but an exception to the general rule that the attorney-client privilege is waived when privileged information is disclosed to a third party.’ Cavallaro, 284 F.3d at 250. It generally does not protect communications that did not include an attorney or another privileged person. See United States v. Krug, 868 F.3d 82, 87 (2d Cir. 2017) (noting that, while the doctrine ‘somewhat relaxes the requirement of confidentiality by defining a widened circle of persons to whom clients may disclose privileged communications,’ a communication only among the clients is only privileged if it was ‘made for the purpose of communicating with a privileged person, i.e., the lawyer,’ or the lawyer’s agent or client’s agent). ‘The application of properly formulated doctrine to the facts remains a matter of discretion for the district court.’ Massachusetts Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., 412 F.3d 215, 225 (1st Cir. 2005).”

Vermont Telephone Company, Inc. v. FirstLight Fiber, Inc. (Material breaches of contract). “Plaintiff next argues that even if it did breach the Lease, said breach was not material as a matter of law. ‘For a breach of contract to be material, it must go to the root or essence of the agreement between the parties, or be one which touches the fundamental purpose of the contract.’ Found. for Seacoast Health v. Hosp. Corp. of Am., 165 N.H. 168, 181–82 (2013). ‘A breach is material if: (1) a party fails to perform a substantial part of the contract or one or more of its essential terms of conditions; (2) the breach substantially defeats the contract’s purpose; or (3) the breach is such that upon a reasonable interpretation of the contract, the parties considered the breach as vital to the existence of the contract.’ Id. at 182. ‘Whether a breach of contract is material is a question of fact.’ Id. at 181.”

§ 2.3.11 New Jersey’s Complex Business Litigation Program

Twp. Of Parsippany-Troy Hills v. Thomas Controls, Inc. v. Keystone Engineering Group, et al. (Breach of contract and negligence). In this breach of contract and negligence action arising from a dispute in connection with construction improvements to be made to plaintiff’s wastewater treatment plan, the New Jersey Superior Court confirmed that New Jersey’s Affidavit of Merit statute indeed has teeth. The court dismissed with prejudice the third-party complaint of defendant/third-party plaintiff, Thomas Controls, Inc. (TCI) for TCI’s failure to timely serve an Affidavit of Merit (AOM) in connection with TCI’s third-party complaint alleging, inter alia, professional malpractice against Keystone, the engineer for the construction project at issue.

New Jersey’s AOM Statute (N.J.S.A. 2A:53-27, et seq.) requires a plaintiff seeking damages for personal injuries, wrongful death or property damage resulting from an alleged act of negligence or malpractice by a licensed person in his or her profession or occupation to provide the defendant with an affidavit of an appropriate licensed person that such claims have merit (i.e., an AOM). Under the statute, the AOM must be provided within 120 days following the filing of the answer to the complaint. TCI acknowledged that it failed to timely serve the AOM, but argued that it had nonetheless substantially complied with the AOM Statute by filing the AOM shortly after receiving Keystone’s motion to dismiss.

In granting Keystone’s motion to dismiss with prejudice, the court (at least tacitly) agreed with Keystone’s arguments that the AOM Statute applies to malpractice actions against engineers, as well as to third-party complaints. The court also ruled that TCI failed to substantially comply with the AOM Statute and granted Keystone’s motion to dismiss the third-party complaint with prejudice for failure to comply with the AOM Statute.

Weston Landing Condominium Assoc., Inc. v. Centex et al. (Construction defect). In this construction defect case concerning roofing work performed by certain defendants, the New Jersey Superior Court reaffirmed New Jersey’s “strong public policy favoring non-disclosure of confidential settlements.” In this multi-party action, a non-settling defendant filed a motion to compel the terms of a settlement between plaintiff and other settling defendants. The non-settling defendant argued that, because the other roofing defendants had already settled and the cost to repair the roof was a fixed amount given that the roof repairs had already been made, the non-settling defendant was entitled to information about the settlement so that plaintiff would not receive an unfair windfall if the non-settling defendant was not provided with a post-trial credit.

In denying the non-settling defendant’s motion to compel, the court noted that while New Jersey’s strong public policy favoring settlements does not override the presumption of access to court records, the terms of the settlement in the instant case, as opposed to other cases cited by the non-settling defendant, were not placed on the record in court and were not a matter of public record. Therefore, the court denied the non-settling defendant’s motion as “[defendant] fail[ed] to cite to any case that allows a court in New Jersey to compel the disclosure of confidential settlement terms if those terms were not a matter of public record.”

§ 2.3.12 New York Supreme Court Commercial Division

Chen v Fox Rehab. Servs., P.C. (Pre-answer motion to dismiss). This case is an example of a pre-answer motion to dismiss based on documentary evidence—a form of motion practice that is relatively unique to New York. There, the Bronx County Commercial Division dismissed nine of ten claims brought by the plaintiffs for failure to state a claim, but did not dismiss the plaintiffs’ breach of contract claim, despite the defendants’ introduction of documentary evidence aimed at defeating that claim.

In Chen, a group of five physical and occupational therapists brought suit against their former/current employer (Fox Rehabilitation Services, P.C. or “Fox”), its founder, CEO, chief of staff, and a related company (Fox Rehabilitation Physical, Occupational and Speech Therapy Services, L.L.C. or “FTS”). In their amended complaint, the plaintiffs alleged that the defendants represented to them “explicitly and in writing—that they would be paid out of a deferred compensation plan upon a 50% change in control of the company (i.e. an acquisition) . . . .” When the acquisition occurred and the plaintiffs requested their deferred compensation, they claimed that the defendants improperly denied their compensation on the grounds that the transaction did not satisfy the definition for change of control and that the compensation plan had been abolished five years earlier. Critically, the plaintiffs pleaded that they were never shown copies of what the defendants claimed to have been the actual compensation plan or copies of the notice that the plan was abolished, just copies of a Summary Plan Description (or “SPD”). The plaintiffs asserted a variety of claims, including for breach of contract, which the defendants moved to dismiss in full on the basis of documentary evidence under CPLR § 3211(a)(1) and for failure to state a cause of action under CPLR § 3211(a)(7).

The defendants introduced four sets of documents to support their motion to dismiss, including copies of the Plan, the SPD, a document terminating the Plan, and documents reflecting the denial of plaintiffs’ requests for compensation under claims procedure provisions in the Plan. The introduction of these documents placed the case into a unique procedural posture. As the court noted, the New York Court of Appeals has previously stated that “‘when evidentiary material [in support of dismissal] is considered the criterion is whether the proponent of the pleading has a cause of action not whether he has stated one.’” In light of this binding precedent, the court explained “that if the evidence submitted controverts the allegations in the complaint, they are not deemed true and dismissal for failure to state a cause of action is warranted.” The court further explained that, at the motion to dismiss stage, documentary evidence can be considered, but only “judicial records, judgments, orders, contracts, deeds, wills, mortgages and ‘a paper whose content is essentially undeniable and which, assuming the verity of its contents and the validity of its execution, will itself support the ground upon which the motion is based’. . . .”

With those principles in mind, the court determined that the documents submitted by the defendants constituted documentary evidence under CPLR § 3211(a)(1) and stated that it “must view the allegations in the complaint against the backdrop of these documents and resolve any conflict in favor of the documents. This is no less true despite plaintiffs’ assertion that they question the authenticity and validity of the Plan and termination document.” The court held that the SPD was not the agreement between the parties; instead, the Plan governed between the parties. Then, pursuant to a New Jersey choice-of-law provision in the Plan, the court applied New Jersey substantive law to interpret the contract, concluding that the termination provision in the Plan “proscribed cancellation of the Plan if any participant had earned equity appreciation under the terms of the Plan on the date of cancellation.” While the defendants submitted documents claiming that there was no value at termination, the court noted that “they submitted documents which only conclusorily alleged that when the Plan was terminated, as relevant here, that the company’s value was less than plaintiffs’ base value in the Plan”; the “[d]efendants could and should have submitted documents detailing the [specific values] . . . when the Plan was terminated thereby establishing that the Plan was terminated in accordance with its terms.” The court stated that “the record is bereft of specific and detailed information establishing that Fox terminated the Plan in accordance with section 8.2 of the same,” and it denied dismissal of the breach of contract claim. At the end of the decision, the court also denied the defendants’ motion to dismiss the breach of contract claim under CPLR § 3211(a)(1) on the same grounds.

Magnetic Parts Trading Ltd. v. National Air Cargo Group, Inc. (Motion to amend the pleadings). The Commercial Division’s decision in Magnetic Parts Trading Limited v. National Air Cargo Group, Inc., demonstrates the flexibility and leniency courts embody when adjudicating motions to amend pleadings. In Magnetic Parts, the New York County Commercial Division granted National Airlines Cargo Group’s (National Airlines) motion for leave to amend its answer to assert counterclaims against Magnetic Parts Trading Limited (Magnetic Parts).

In December 2002 Magnetic Parts, as lessor, and National Airlines, as lessee, entered into a written lease (the Lease) for a Rolls Royce aircraft engine. National Airlines agreed to pay Magnetic Parts a $150,000 deposit and $60,000 fee each month. The Lease provided that if National Airlines failed to redeliver the engine, the lease term would automatically extend. In January 2020, National Airlines informed Magnetic Parts that it did not intend to re-lease the engine but failed to redeliver the engine. Magnetic Parts took the position that the lease term had been automatically extended and continued to charge National Airlines a monthly fee. A later inspection of the engine revealed several defects including corrosion on the fan case. Magnetic Parts claimed that the defects were caused by National Airlines and rendered the engine unserviceable. As a result, Magnetic Parts filed a complaint in September 2020 pleading causes of actions for breach of the Lease, unjust enrichment, and an account stated. National Airlines interposed seven affirmative defenses in its answer, and two years later moved to amend its answer to assert two counterclaims for breach of contract and for breach of the covenant of good faith and fair dealing on the ground that Magnetic Parts had prior knowledge of pre-existing corrosion problems with Rolls-Royce engines. Magnetic Parts opposed the motion on the ground that National Airlines had waited for more than two years to assert its counterclaims.

The court first explained the standard for granting leave to amend pleadings, holding that it is well settled that “leave to amend a pleading should be freely granted in the absence of prejudice to the nonmoving party where the amendment is not patently lacking in merit,” and that a “party opposing leave to amend ‘must overcome a heavy presumption of validity in favor of permitting amendment’” by demonstrating prejudice or surprise or that the proposed amendment is palpably insufficient or patently devoid of merit.

The court found Magnetic Parts’ undue delay argument unpersuasive, explaining that a “showing of lateness must be coupled with significant prejudice to the other side to warrant relief,” and such prejudice exists only where a party “has been hindered in the preparation of its case or has been prevented from taking some measure in support of its position.” Because Magnetic Parts had not demonstrated any such prejudice, the court ultimately concluded that the two-year delay was not so significant as to warrant denial of the motion.

This did not end the inquiry, however. Turning to the substance of the proposed counterclaims, the court explained that the “party moving for the amendment need not establish the merit of the claim, only that the proposed amendment is not palpably insufficient or clearly devoid of merit.” The court held that National Airlines had met its burden on the proposed counterclaim for a breach of contract. To support its claim National Airlines alleged that corrosion of the fan case was a known issue falling outside of “routine-scheduled, condition monitored or on-condition line maintenance” as provided by the Lease and that it was therefore under no obligation to correct the condition, as doing so would violate the clause of the Lease prohibiting modification, alteration, overhaul, or repair of the engine. National Airlines also alleged that Magnetic Parts refused to cover the cost of replacing the fan case despite having collected $150,000 in fees for that purpose and failed to designate a redelivery location when National Airline offered to redeliver the engine. Magnetic Parts argued that these allegations were insufficient to state a claim because National Airlines could not establish willful misconduct or gross negligence based on the fact that it had been in possession of the engine for several years, was responsible for its care and maintenance, and had superior knowledge about its condition. The court rejected these arguments, found that National Airlines assertions were sufficient to state a cause of action for breach of contract, and granted leave to amend. Because National Airlines’ breach of good faith and fair dealing counterclaim rested on the same facts as its breach of contract claim, the court held it was duplicative and denied the motion with respect to this counterclaim.

Five Star Elec. Corp. v. Silverite Constr. Co. Inc. (No-damages for delay contract provision). The New York County Commercial Division’s decision in Five Star Elec. Corp. v. Silverite Constr. Co. Inc. demonstrates the narrow scope, and strict interpretation, of no-damages for delay provisions in a contract. The decision reaffirmed the proposition that no-damages for delay clauses are enforceable and a party challenging such clauses bears a heavy burden to demonstrate that an exception to enforcement applies or that enforcement has been waived based on the parties’ conduct or prior business dealings.

In June 2012, Silverite entered a contract with New York City School Construction Authority (SCA) to construct P.S. 315, a school in Queens (the “Project”). Later that year, in September 2012, Plaintiff Five Star and Defendant Silverite entered a subcontract under which Five Star was to furnish and install electrical and fire alarm equipment for the Project. Both the contract between Silverite and the SCA and the subcontract between Silverite and Five Star contained “no-damages for delay” clauses, which provided that the parties waived their claims for damages based on delay in performance and that the sole remedy for any such delay would be an extension of the time to perform and completion of the required work. These clauses notwithstanding, when work on the project was ultimately delayed, Five Start filed suit against Silverite, asserting that due to “Silverite’s bad faith, gross negligence and fundamental breach of its obligations under the… [s]ubcontract,” Five Star sustained damages. Specifically, Five Star claimed that Silverite unreasonably delayed “the review/resolution of [] requests for information, change orders, field work orders and related… project issues” and generally acted in “bad faith and with willful, malicious and grossly negligent conduct.” Silverite moved to dismiss the action, arguing that Five Star’s claims were clearly barred by the relevant no-damages clauses.

The court was not persuaded by Five Star’s argument that SCA and Silverite waived enforcement of the no-damages for delay provisions in the underlying agreements “because Silverite submitted at least some of Five Star and Silverite’s claims for delay damages to SCA.” In support Five Star relied on Pizzarotti, LLC v. FPG Maiden Lane LLC, 187 A.D.3d 420, 420 (1st Dept 2020), where “the First Department found, in a Lien Law case, that the waivers in the defendant’s payment applications ‘raised an issue of fact as to whether the waivers released plaintiff’s payment claims.’” The court in Five Star was not convinced and held that the “no-damages for delay provision b[ound] the parties.” Relying on the Court of Appeal’s decision in Corinno Civetta Constr. Corp. v. City of New York, 67 N.Y.2d 297, 309 (1986) (Corinno Civetta)—which held that “‘[a] clause which exculpates a contractee from liability to a contractor for damages resulting from delays in the performance of the latter’s work is valid and enforceable’ when the underlying contract and the provision satisfy the general requirements for contractual validity”—the court found that because Five Star did not assert that the relevant contract or subcontract themselves were invalid, the no damages for delay provisions in those agreements were generally enforceable.

Moreover, the court held that none of the recognized exceptions to the enforcement of a no-damages for delay provision were applicable here. Pursuant to Corinno Civetta, “damages may be recovered for: (1) delays caused by the contractee’s bad faith or its willful, malicious, or grossly negligent conduct, (2) uncontemplated delays, (3) delays so unreasonable that they constitute an intentional abandonment of the contract by the contractee, and (4) delays resulting from the contractee’s breach of a fundamental obligation of the contract.” Specifically, the court held that Five Star failed to allege any facts in support of its conclusory allegations that “(1) Silverite unreasonably delayed, disrupted, and interfered with Five Star’s performance, (2) these disruptions were not contemplated by the subcontract, (3) Silverite did not properly coordinate Five Star’s work, (4) Silverite did not ‘promptly review/resolve . . . requests for information, change orders, field work orders and related . . . Project issues,’ (5) Silverite acted in bad faith, willfully, maliciously, and in a grossly negligent manner, and (6) Silverite did not perform ‘numerous fundamental obligations of the . . . Subcontract,’” and it therefore had failed to meet its pleading burden to establish that one of the recognized exceptions applied to its claims. Ultimately, the court concluded that that the “no-damages provision [was] clear on its face, and courts habitually enforce[d] such clauses.”

SPG Cap. Partners LLC v. Cascade 553 LLC (Preliminary agreement in advance of a term sheet). In SPG Cap. Partners LLC v. Cascade 553 LLC, the New York County Commercial Division considered the enforceability of certain types of preliminary agreements in connection with a term sheet signed by the parties in anticipation of a real estate investment that later fell through. The court’s decision in this case highlights the risks of using these types of agreements to obtain promises from a counterparty, and it underscores the importance of drafting clear expressions of intent to ensure that such contracts are enforceable.

In this case, the plaintiff, SPG Capital Partners LLC (“SPG”), reached an agreement in principle with the defendant, Cascade 553 LLC (“Cascade”), whereby SPG would provide a mortgage loan to Cascade in connection with a planned real estate development in Brooklyn. Pursuant to the term sheet signed by the parties, SPG would provide a first mortgage loan to Cascade of $110,000,000, and Cascade would pay SPG $200,000 as a good-faith deposit. The term sheet stated that the document was “for discussion purposes only and [] subject to the Lender’s satisfactory completion of its due diligence, internal credit approvals and satisfactory legal review.” It further included an exclusivity clause and a liquidated damages clause obligating Cascade to pay SPG a breakup fee in the event the borrower elected not to proceed with the loan. The loan process did not go as planned and Cascade ultimately decided to obtain financing from another company. SPG then sued Cascade, seeking, inter alia, to enforce the term sheet’s liquidated damages and exclusivity clauses. SPG argued that even if the term sheet were otherwise unenforceable, the relevant clause was “independently enforceable” because the document expressly stated that those provisions would “survive the termination of this Term Sheet.” Cascade ultimately moved for summary judgment on SPG’s claims.

In its decision, the court agreed with Cascade that the parties’ term sheet was unenforceable. It found that “the document repeatedly emphasize[d] its nonbinding nature,” insofar as the term sheet was “expressly conditioned on the completion of the lender’s due diligence, further satisfactory negotiation by the parties, and the acceptance of the loan documents.” The court noted that “in those cases where courts have found letters of intent or term sheets to be binding, courts have relied not only on the specificity of the details in the documents but a similar manifestation of intent,” which was nowhere to be found in the term sheet at issue. Further, “virtually all the obligations in the term sheet fell upon” Cascade, whereas the agreement gave SPG “sole discretion” to “terminate the term sheet” and “determine the terms upon which it would extend credit.” And although SPG agreed to perform due diligence in connection with the transaction, the term sheet “bound Cascade to refrain from seeking other financing without regard to whether [SPG] moved forward with its due diligence in a timely fashion or adhered to the other provisions in the term sheet.” The court thus found that the lack of “mutuality of obligation” in the agreement, coupled with its nonbinding and conditional language, suggested that the parties did not intend to be bound by its terms.

Moreover, the court rejected SPG’s alternative argument that the exclusivity provisions in the agreement—which forbade Cascade from obtaining a first mortgage loan from a different lender—were independently enforceable, even if the term sheet were otherwise an unenforceable agreement to agree. The court noted that courts have enforced similar terms only where the “exclusivity provision [states that it] shall survive the term sheet and is binding regardless of the binding nature of the term sheet.” Here, although the document stated that the exclusivity provisions would “survive the termination of this Term Sheet,” there was “no statement that render[ed] the provision enforceable notwithstanding the nonbinding nature of the term sheet.” The court thus found that the exclusivity provisions could not be severed from the rest of the document.

CDx Diagnostics, Inc. v. Rutenberg (Motion to compel arbitration, Noerr-Pennington doctrine, tortious interference). In CDx Diagnostics, Inc. v. Rutenberg, the Commercial Division for New York County, clarified a range of legal issues involving motions to compel arbitration, the scope of the Noerr-Pennington doctrine, and tortious interference with contractual rights.

This case arose out of the transfer of control of the plaintiff CDx Diagnostics, Inc. from its founder, the defendant Dr. Mark Rutenberg, to private equity firm Galen. In connection with this transaction, Rutenberg entered into an Executive Employment Agreement (“EEA”) and an IP Agreement with CDx. Under the IP Agreement, Rutenberg assigned all proprietary rights to his inventions developed during the course of his employment to CDx. The EEA contained an arbitration clause that provided, in relevant part, that, “any dispute between the parties arising out of or relating to the negotiation, execution, performance or termination of this Agreement or Executive’s employment, including, but not limited to, any claim arising out of this Agreement … shall be settled by binding arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association.” Several years after this transaction, the parties fell into a dispute regarding a patent application for cancer detection technology filed by Rutenberg, which ultimately led to the termination of his employment. Shortly thereafter, CDx commenced an action against Rutenberg, seeking, among other things, (1) a declaration that the IP Agreement was enforceable; (2) an order invalidating Rutenberg’s assignment of the cancer detection technology; (3) a declaration that CDx was the rightful owner of the relevant patent; and (4) an order compelling Rutenberg to assign the intellectual property to CDx. In response, Rutenberg raised a host of affirmative defenses and counter-claims, including claims of wrongful termination, abuse of process, conversion, civil conspiracy, and misappropriation of commercial advantage. Specifically, Rutenberg claimed that by filing a “fraudulent lawsuit,” CDx had “usurped” and “misappropriate[d] economic opportunity” from the defendants. CDx moved to compel Rutenberg to arbitrate his counter-claims.

Ultimately, the court granted CDx’s motion to compel arbitration. The court began with the proposition that agreements to arbitrate disputes are both favored as a matter of policy and binding as a matter of law, as per the terms of the Federal Arbitration Act. Under New York law, the court emphasized that the court’s role in deciding motions to arbitrate is narrow: it must determine only whether there is a reasonable relationship between the subject-matter of the dispute and the general subject-matter of the underlying contract. Once such a reasonable relationship is established, the court must grant the motion. Any ambiguity in the scope of the arbitration clause must be resolved in favor of arbitration. The court held that the scope of the arbitration clause in the EEA was sufficiently broad to capture within its ambit most of Rutenberg’s counter-claims against CDx, including the wrongful termination claim.

The court also rejected both arguments Rutenberg raised in opposition to the motion. First, Rutenberg argued that the arbitration clause in the EEA terminated when Rutenberg’s role in CDx changed from CEO to Chief Scientific Officer a year before his termination from the company. As a result, Rutenberg argued, the EEA’s arbitration clause did not extend to his wrongful termination claim. The court held that the question of whether an arbitration clause survived the change in Rutenberg’s employment at CDx was a matter for the arbitrator to decide. Second, Rutenberg argued that the arbitration clause did not apply to the dispute over the intellectual property between Rutenberg and CDx, which was the crux of the litigation between the parties. Rutenberg claimed that granting the motion to arbitrate would lead to multiple and overlapping claims before multiple fora. The court ruled, relying on binding appellate precedent in PNE Media, LLC v. Cistrone, 294 A.D.2d 143 (1st Dep’t 2002), that “arbitration clauses are binding contracts which must be strictly enforced, even if enforcement will lead to bifurcated and overlapping litigation.” The court ultimately concluded that even if the employment dispute had to be arbitrated before an arbitrator and the intellectual property claim had to be litigated before a court, the possibility of bifurcated litigation was not sufficient grounds to deny CDx’s motion to compel arbitration.

Turning to the counter-claims, the court held that commencing a legal action in court was a protected activity under the First Amendment, and that the Noerr-Pennington thus doctrine barred the counter-claims. Under the Noerr-Pennington doctrine, “parties may not be subjected to liability for petitioning the government.” The court held that the act of filing a complaint and summons in court fell within the scope of “petitioning activity” under the Noerr-Pennington doctrine. The court concluded that “the Noerr-Pennington doctrine precludes precisely what [defendants] attempt to do here: interfere with the act of filing a lawsuit, which is protected First Amendment activity, by bringing civil claims against the plaintiff, CDx, based on that act.” The court then rejected Rutenberg’s argument that the instant action fell within the “sham lawsuit” exception to the doctrine, holding that the exception was a narrow one and that the burden of proving the exception fell on the party invoking it. In order to successfully invoke the “sham lawsuit” exception, Rutenberg and the other defendants had to show that “no reasonable litigant could realistically expect success on the merits of CDx’s declaratory judgment claim.” The court concluded that so long as CDx had “probable cause” to bring the lawsuit, which the court found existed in this case, the company was protected under the Noerr-Pennington doctrine. Accordingly, the court dismissed most of the defendants’ counter-claims.

The court also dismissed the claim against Galen for tortious interference with Rutenberg’s contract. A party asserting tortious interference must a plead the following facts: “(1) that a valid contract exists; (2) that a third party had knowledge of the contract; (3) that the third party intentionally and improperly procured the breach of the contract; and (4) that the breach resulted in damage to the plaintiff.” However, the third party is not liable for tortious interference if such conduct was justified under the economic interest doctrine, which provides that a third party is immune from liability for interfering with someone else’s contract, when such third party is “acting to protect its own legal or financial stake in the breaching party’s business.” The court noted that “a corporation that acquires another corporation and then causes one of the acquired corporation’s contracts to be terminated, is not liable for interference with that contract, because it had an economic justification for its actions.” The court held that Galen pleaded sufficient facts to establish the economic justification defense. Once the economic interest defense is established, the party asserting tortious interference must plead that the contractual interference was affected “through illegal or fraudulent means, or were otherwise motivated by malice.” Since the court found that Rutenberg’s allegations of illegality and malice against Galen were merely conclusory in nature, the court dismissed the tortious interference claim.

Haart v. Scaglia (Res judicata and collateral estoppel). In Haart v. Scaglia, the New York County Commercial Division partially granted the defendant’s motion to dismiss based on the doctrines of res judicata and collateral estoppel. The court found that the plaintiff was attempting to relitigate issues and facts that were previously decided in a Delaware case.

This case was at least the fourth of five lawsuits filed by Julia Haart (“Haart”) and Silvio Scaglia (“Scaglia”) in Delaware and New York in recent years related to their personal and business divorce. Scaglia is an Italian entrepreneur and investor, and Haart is a designer who became CEO of Elite World Group (EWG), one of Scaglia’s companies. After marrying Haart, Scaglia formed a holding company called Freedom and transferred his interests in EWG to it. Scaglia then transferred ownership of half of Freedom’s common stock to Haart, retaining 100% ownership of Freedom’s preferred stock. Haart alleged that Scaglia fraudulently concealed the existence of these preferred shares from her in connection with this transaction and that she entered into the deal with the understanding that the transfer of the common stock would make her an equal partner with Scaglia. Haart alleged that she only learned about the preferred shares during negotiations for a possible SPAC transaction for EWG, at which point Scaglia allegedly transferred her half of the preferred stock in the company. Haart also alleged that Scaglia unilaterally transferred $1.5 million from Freedom’s bank account and transferred other company property without informing her, in a manner inconsistent with their purported 50-50 partnership. Eventually, the personal and business relationship between the parties soured, leading to the instant action.

Prior to the instant action, Haart filed suit against Scaglia in Delaware, Haart v. Scaglia and Freedom Holding, Inc. & Elite World Group, LLC, C.A. No. 2022-0145-MTZ (the “Delaware Action”) seeking a declaratory judgment acknowledging her equal ownership of Freedom with Scaglia, invalidating her removal as a director and CEO of Freedom, affecting a judicial dissolution of Freedom, and asserting claims for breach of fiduciary duty. After a multi-day trial, the Delaware Court concluded (based on the language of the written agreements between the parties and Haart’s testimony about promises made by Scaglia to make her a 50% partner) that Haart was not in fact a 50% owner of Freedom.

In the instant action, Haart filed a lawsuit, inter alia, seeking a declaratory judgment and asserting claims for fraudulent inducement, fraudulent concealment, breach of contract, breach of fiduciary duty, unjust enrichment, promissory estoppel, and conversion. Haart alleged that Scaglia promised her that she would be a 50% partner in Freedom as compensation for her work as EWG’s CEO, but he intentionally concealed the existence of a preferred class of shares when he transferred 50% of the company’s common stock to her. Haart further alleged that Scaglia breached his promises, converted her property, and benefited from her work without compensating her. Scaglia sought dismissal of these claims on res judicata and collateral estoppel grounds in light of the earlier decision in the Delaware Action. In her opposition papers, Haart argued that the issues in the New York case were not identical to those in the Delaware Action because she explicitly conceded here that she was not a 50% owner of Freedom.

The New York County Commercial Division held that most of Haart’s claims were barred by the doctrines of res judicata and collateral estoppel. Citing controlling law from the New York Court of Appeals, the court explained that “[u]nder the doctrine of res judicata, when a claim is brought to a final conclusion, all other claims arising from the same transaction or series of transactions are barred, even if based on different theories or if seeking a different remedy.” As the court further explained, the “doctrine of collateral estoppel precludes a party from litigating an issue which has previously been decided against them in a proceeding in which they had a fair opportunity to fully litigate the point.” Here, the court found that the claims at issue in the Delaware Action involved the same documents, testimony, and evidence, and involved many of the same questions that would be at issue in the instant action, namely, whether Scaglia had promised to make Haart a 50-50 owner of Freedom (a question that the Delaware court ultimately answered in the negative). Thus, even though Haart may have been advancing a slightly different theory to seek recovery in the instant action, the court concluded that her claims for fraudulent inducement, fraudulent concealment, breach of contract, and promissory estoppel all arose from the same transaction or occurrence or involved the same questions at issue in the Delaware Action, and dismissed these claims from the case on res judicata and collateral estoppel grounds.

With respect to Haart’s remaining claims for breach of fiduciary duty, conversion, and the declaratory judgement that she owned a 49.9% share of Freedom—all of which were unrelated to Haart’s claim she had been promised a 50% stake in the company—the court found that res judicata and collateral estoppel did not apply and denied the motion to dismiss, finding that Haart had pled sufficient facts to state a claim for these causes of action.

Worbes Corp. v. Sebrow (Arbitration). In Worbes Corp. v. Sebrow, the Bronx County Commercial Division addressed the question of how long and to what extent can a party litigate in court before claiming that the dispute needs to be arbitrated. Ultimately, the court dismissed the plaintiffs’ motion seeking to compel arbitration against the defendants, reaffirming that despite favoring arbitration (where the parties have agreed to arbitrate their claims), courts may not compel arbitration if a party has litigated a matter extensively in court.

The complaint in Worbes alleged that plaintiff ZVI Sebrow (“ZS”) owned 50% of the stocks in Worbes Corp. (“Worbes”), a corporation, whose sole asset was real property located in the Bronx and whose exclusive business was to own, hold, and operate the property. Worbes Corp. was governed by a Stockholder’s Agreement (“Agreement”), which included an arbitration clause and whereby the shares in the corporation were equally owned by Abraham Sebrow (“AS”), Joseph Sebrow (“JS”), ZS, and David Sebrow (“DS”). When AS died in 2000, ZS became the owner of 50% of the shares in Worbes, and upon JS’s death, DS became the owner of 50% of the shares in the corporation. When DS died in 2017, his shares were reverted to Worbes. In 2019, DS’s wife Betty Sebrow (“BS”) filed an action seeking a declaration that, upon DS’s death, she and DS’s estate became owners of 50% of the shares in Worbes. She was unsuccessful, moved to reargue the court’s decision, and also filed an appeal. The motion to reargue and the appeal were pending when the instant decision was issued.

On January 5, 2022, ZS entered into a contract on behalf of Worbes to sell the property for $5,500,000, and sought a declaratory judgement from the court that BS did not own any of the shares in Worbes. ZS also argued that BS’s initiation of the prior action prevented ZS from selling the property and amounted to tortious interference with prospective business relations, abuse of process, and malicious prosecution. Additionally, ZS asserted that if it was found that BS owned any share in Worbes, “the refusal to consent to the sale of the [property] unless their demands [were] met constitute[d] a breach of duty of loyalty to Worbes.” ZS also moved for an order pursuant to CPLR §7503(a), compelling defendants to participate in arbitration, pursuant to the arbitration clause in the Stockholders Agreement.

In ruling on the motion, the court explained that under CPLR §7503(a), a party can seek leave to compel arbitration, and similarly, under CPLR §7503(b), an opposing party may seek an injunction to stay arbitration. It further noted that the right to arbitrate was not “unfettered and irrevocable,” and a party, “by his conduct, can waive the right” even if it was granted by an agreement between the parties. The court went on to consider five factors to determine whether the right to arbitrate had been waived, including: (1) whether the party seeking arbitration had “elected to proceed and/or resolve the otherwise arbitral dispute between the parties in a ‘judicial arena,’” which usually depends on “the amount of litigation that has occurred, the length of time between the start of the litigation and the arbitration request, and whether prejudice has been established”; (2) whether the party seeking to compel arbitration availed itself of the remedies available in court; (3) “whether the claims before the court are the same as those sought to be arbitrated”; (4) whether the party seeking to compel arbitration delayed seeking arbitration of its claims; and (5) whether arbitration would result in prejudice to the party opposing arbitration.

Applying the first and second factor to the matter before it, the court held that the plaintiffs, ZS and Worbes, had “so significantly availed themselves of the litigation process in th[e] action, so as to constitute waiver of the right to arbitration.” The court explained that the plaintiffs initiated the action by filing a complaint containing causes of actions sounding in declaratory judgement, tortious interference with prospective business relations, abuse of process, malicious prosecution, and breach of fiduciary duty. Moreover, the plaintiffs had filed five motions seeking various relief and remedies before they filed the instant motion to compel arbitration. The court noted that it agreed with the plaintiff that “under the circumstances then existing—the existence of a tax lien …—judicial intervention authorizing the sale of the [property] was necessary.” Thus, the court’s decision was “not premised on the plaintiffs’ initiation of the instant action”; “[h]ad the plaintiffs sought arbitration at that point, it is likely that the instant motion would have been granted.” However, the plaintiffs “decided to avail themselves of this court’s ability to decide this action on papers and made a motion, their third, seeking summary judgement.” The court held that this was clearly inconsistent with the plaintiffs’ claim that the parties were obligated to settle their differences by arbitration.

Moving to the third factor, the court noted that although the plaintiffs’ motion papers were “bereft of any indication of what issues” they seek to arbitrate, the court “will assume that they are the very issues asserted in the complaint.” The court denied the motion to compel arbitration because the claims that the plaintiffs seek to arbitrate had already been asserted before the court.

Addressing the fourth and fifth factors, the court held that the plaintiffs had “for months charted a course of litigation,” causing a significant delay in the resolution of the claims. The “plaintiffs waited almost a year from the time they were granted the exigent relief that they could not get via arbitration to seek arbitration.” The court opined that this delay “when viewed against the procedural history is egregious and militates in favor of the conclusion urged by defendants, namely that when it became apparent that the litigation in this action would be protracted, plaintiffs’ moved to abandon it and avail themselves of arbitration.” The court found this unacceptable as it would enable the plaintiffs to create their own unique structure combining litigation and arbitration. Lastly, the court noted that the defendant had incurred unnecessary delay and expense; hence, it would be prejudiced if compelled to arbitrate.

Trump v. Trump (Anti-SLAPP, breach of contract). The New York County Commercial Division’s decision in Trump v. Trump, 192 N.Y.S.3d 891 (Sup. Ct. N.Y. Cnty. June 9, 2023), provides an example of how courts can approach the interactions between New York’s recently amended anti-SLAPP law and traditional breach of contract claims. This decision largely denied Mary Trump’s motion to dismiss the claims brought by former president Donald Trump alleging that she breached a settlement agreement by disclosing documents to The New York Times and publishing a book that discussed the finances of the Trump family.

This decision arose out of a long-running dispute over the publication of financial information from the Trump family in the pages of the Times—specifically, in a 2018 article titled “Trump Engaged in Suspect Tax Schemes as He Reaped Riches from His Father”—as well as Mary Trump’s 2020 book, Too Much and Never Enough: How My Family Created the World’s Most Dangerous Man. As the court explained, Mary Trump had access to this information as a result of her participation as an objectant in litigation over the estate of Frederick C. Trump. The case was ultimately resolved with a 2001 settlement agreement, which included a confidentiality clause.

In 2021, Donald Trump brought claims against Mary Trump for the publication of her book, as well as claims against Mary Trump, the Times, and several Times journalists related to the Times article. While the suit was pending, New York expanded the scope of its anti-SLAPP law—which is aimed at frivolous strategic lawsuits against public participation (SLAPP) that seek to deter free speech. Mechanically, New York’s anti-SLAPP law operates by, inter alia, requiring a showing either that (a) the “cause of action has a substantial basis in law” or (b) the cause of action “is supported by a substantial argument for an extension, modification or reversal of existing law” under CPLR § 3211(g). However, this heightened standard only applies to actions “involving public petition and participation.” Prior to the 2020 expansion, actions involving public petition and participation were limited “to instances where speech was aimed toward a public applicant or permittee.” In 2020, New York expanded the scope of those actions to include “any communication in a place open to the public or a public forum in connection with an issue of public interest.”

The Times, its employees, and Mary Trump all filed motions to dismiss under the revised anti-SLAPP law. On May 3, 2023, the court found that the anti-SLAPP law applied to claims asserted against the Times and its employees and dismissed those claims. This left three claims—for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, and (3) unjust enrichment, against Mary Trump—to be decided in her motion to dismiss.

As a threshold matter, the court first addressed whether or not the claims against Mary Trump were covered by New York’s anti-SLAPP law. As the court noted, “Mary Trump argues that each claim asserted against her predicated liability on protected speech—the publication of the book and the provision of documents to a journalist reporting on issues of public interest and concern.” In contrast, Donald Trump argued that “his claims against Mary Trump are not subject to the anti-SLAPP law because the claims . . . are based upon on Mary Trump’s alleged violation of a binding settlement agreement that explicitly prohibited such publication.”

Weighing California law interpreting California’s similar anti-SLAPP law, the court ultimately found the decision in City of Alhambra v. D’Ausilio, 193 Cal. App. 4th 1301 (Ct. App. 2011) to be persuasive. In City of Alhambra, the City sued the defendant for breaching a settlement agreement that prohibited him from certain speech-related conduct. As the court summarized, “the court of appeal held that the ‘City did not sue [D’Ausilio] because he engaged in protected speech,’ but rather because ‘it believed he breached a contract which prevented him from engaging in certain speech-related conduct and a dispute exists as to the scope and validity of the contract,’ and that the suit, therefore, did not ‘arise from’ the protected activities.” Applying the same logic to this case, the court found that “New York’s amended anti-SLAPP law does not apply to prohibit plaintiff’s claims as asserted against Mary Trump.”

As a part of this discussion, the court also distinguished its determination in this motion sequence from the Times’ motion by noting first that the claims against the Times sounded in tort, not contract, and that “a wealth of case law supports the notion that the press is constitutionally protected to engage in the activity of newsgathering.” “In contrast,” the court noted, “Mary Trump has not cited any case law in which a court has held that breaching one’s own confidentiality obligations, by virtue of engaging in commercial speech and publishing a book that specifically addresses matters that are deemed confidential, constitutes, as a matter of law, a protected activity under the anti-SLAPP statute.”

§ 2.3.13 North Carolina Business Court

Cutter v. Vojnovic (Derivate action by a general partner on behalf of the general partnership against another general partner). The plaintiff alleged that he and the individual defendant were equal general partners in a common law partnership formed to purchase three family-owned hot dog restaurants in Ohio and that the individual defendant later misappropriated this partnership opportunity. The plaintiff asserted various claims, both individually and derivatively on behalf of the general partnership. The court dismissed the derivative claims for lack of standing.

Absent contract or consent, North Carolina law does not permit a general partner to bring a claim derivatively on behalf of the general partnership against another general partner. The North Carolina Uniform Partnership Act (“NCUPA”) does not authorize one general partner to assert a derivative action against another general partner (unlike other corporate statutes that permit derivative actions). And because general partners all have the ability to act on behalf of the partnership, all have management rights, and owe one another fiduciary duties, there is no need for derivative action in the general partnership context. Further, the NCUPA creates an adequate remedy for general partners, a claim for an accounting, through which one general partner may pursue claims directly against another general partner to obtain both equitable and monetary relief.

Notably, no reported North Carolina decision has held that a general partner may sue another general partner derivatively. A prior decision permitted a derivative claim by a general partner against a non-partner who allegedly colluded with another general partner to injure the partnership, but that claim was permitted because the partnership had no recourse against the non-partner, since it was impractical to expect the unfaithful general partner to consent to a direct action by the partnership. That decision thus did not hold that general partners may sue each other derivatively.

Visionary Ed. Tech. Holdings Grp., Inc. v. Issuer Direct Corp. (Standing of a corporation and its majority shareholder to demand that the corporation’s transfer agent not register transfer of shares of stock to the registered owner of the shares). The issuer (a Canadian corporation) of certain shares of stock and the issuer’s majority shareholder sued the issuer’s transfer agent under Section 25-8-403 of North Carolina’s Uniform Commercial Code. The majority shareholder (who previously owned the shares) had transferred the shares to two former directors of the issuer. The issuer later claimed that the former directors had no right to retain the shares because they had not met certain performance goals that they had agreed to in connection with the share transfer. The issuer and the majority shareholder thus requested an order that barred the transfer agent from removing restrictions on the shares and registering a transfer of the shares, as well as a declaration that the transfer agent could not be liable to the former directors for refusing a request to register transfer.

The court concluded that the issuer and the majority shareholder lacked standing to seek relief under section 25-8-403. The purpose of section 25-8-403 is to help the registered owner of a security prevent a sham registration request. To that end, the statute allows an “appropriate person” to demand that an issuer’s transfer agent not register transfer of a security. A related statute (section 25-8-107) defines “appropriate person” to mean the security’s registered owner. Accordingly, no one other than the registered owner is allowed to make a demand under section 25-8-403, and the issuer or past owner of shares may not interfere with the registered owner’s right to request registration of a share transfer. As a result, because it was undisputed that the shares at issue here were registered in the name of the former directors, the issuer and majority shareholder did not have standing under section 25-8-403 to make a demand on the transfer agent, obtain an injunction against the transfer agent, or seek a declaration concerning the transfer agent’s potential liability to the former directors.

Harris Teeter Supermarkets, Inc. v. Ace Am. Ins. Co. (Personal jurisdiction over insurance companies based on application of recent Mallory Supreme Court decision). This case involved an insurance coverage dispute between two supermarket chains and their insurers concerning whether the insurers owe coverage to the supermarket chains as to nearly 800 underlying lawsuits seeking damages related to injuries allegedly caused by the supermarket chains’ distribution and dispensing of opioid drugs. Some of the insurers moved to dismiss on personal jurisdiction grounds.

The court concluded that it had personal jurisdiction over the insurers based on the U.S. Supreme Court’s decisions in Mallory v. Norfolk Southern Railway Co. (a case decided while the court was considering the insurers’ motion to dismiss) and Pennsylvania Fire Insurance. Co. of Philadelphia v. Gold Issue Mining & Milling Co. (a 1917 case). Mallory held that a Pennsylvania law requiring registered foreign corporations to consent to suit in Pennsylvania courts in order to do business in Pennsylvania did not violate the Due Process Clause. In doing so, the Supreme Court reaffirmed its prior holding in Pennsylvania Fire, which had rejected a Due Process challenge to a Missouri law requiring out-of-state insurance companies to file “with the Superintendent of the Insurance Department a power of attorney consenting that service of process upon the superintendent should be deemed personal service upon the company so long as it should have any liabilities outstanding in the State.”

Here, the court reasoned that North Carolina has a statutory scheme similar to the Missouri law at issue in Pennsylvania Fire. In particular, the court determined that N.C.G.S. § 58-16-5, a statute that sets forth requirements for foreign insurance companies to be admitted and authorized to do business in North Carolina, makes it “mandatory” for foreign insurance companies to file an “instrument appointing the Commissioner of Insurance as agent for purposes of service of process” under N.C.G.S. § 58-16-30. And because it was undisputed that all the insurers (except one) were licensed to conduct insurance business in North Carolina, all the insurers (except one) had filed an instrument appointing the Commissioner as their agent on whom any legal process may be served under Section 58-16-30, and all the insurers had accepted service of process through the Commissioner, the court ruled that all the insurers (except one) “consented to suit in this State by completing the statutorily required registration procedures for foreign corporations.” As for the one insurer that was a surplus lines insurance company and subject to different licensing requirements under the North Carolina Surplus Lines Act, the court interpreted this statute to “mean that a surplus lines insurer may be sued in this State upon a cause of action arising here under any surplus lines insurance contract made by that insurer, so long as service of process is made upon the Commissioner pursuant to N.C.G.S. § 58-16-30.” Accordingly, personal jurisdiction over that insurer was also proper because it had accepted service of process through the Commissioner under 58-16-30.

Murphy Brown, LLC v. Ace Insurance Company (Allocation of liability among insurers). This insurance coverage dispute arose from several nuisance lawsuits brought against Smithfield Foods and its wholly owned subsidiary, Murphy Brown, in 2013 and 2014. Nearby property owners complained of excessive odor, dust, and noise in connection with Smithfield’s hog farming operations. Following several “bellwether” trials in the Eastern District of North Carolina that resulted in verdicts for the neighboring property owners, all of which were upheld on appeal, Smithfield and Murphy Brown entered into a global settlement with the remaining property owners. Smithfield and Murphy Brown then sued their various insurers who provided primary and excess coverage between 2010 and 2015, seeking a declaratory judgment that the insurers should be liable for the settlement amounts and costs in defending the lawsuits. Previously in this case, the court determined that the insurers owed a duty to defend. The court also granted in part and denied in part motions for partial summary judgment based on the “Pollution Exclusions” contained in Defendants’ various insurance policies.

In the instant summary judgment motion, the court considered the proper method to allocate indemnity liability among the various insurers. The insurers argued that the allocation should be “pro rata” based on the amount of time each insurer provided coverage to Plaintiffs. They relied on a provision in the policies stating that the policies only covered injuries for accidents occurring during the stated policy periods. Plaintiffs, however, pointed to different language in the policies stating that coverage would be provided for “any continuation, change, or resumption” of that injury after the policy period has ended. Based on that language, Plaintiffs claimed they were entitled to recover the entirety of their loss under an “all sums” theory.

The court relied on recent precedent from the North Carolina Supreme Court in Radiator Specialty Co. v. Arrowood Indem. Co., 383 N.C. 387, 881 S.E.2d 597 (2022), which had analyzed similar coverage requirements for damages allegedly caused by repeated exposure to benzene over time. Although noting that state courts were split on the issue, the North Carolina Supreme Court recognized the “modern trend” to give greater weight to the limiting effect of the phrase “during the policy period,” and apply pro rata allocation, even in the presence of other policy language suggesting the insurer would pay all sums arising out of certain injuries. Id. at 414, S.E.2d at 615 and n. 12. Based on the controlling language and reasoning of Radiator Specialty Co., the Business Court concluded that Defendants’ similarly worded policies should also be applied pro rata.

Chi v. Northern Riverfront Marina and Hotel, LLLP (Statute of limitations, equitable estoppel, fiduciary duties). Plaintiffs were a group of Chinese nationals who invested and became limited partners in Northern Riverfront Marina and Hotel, LLLP, a development project in downtown Wilmington, at various times between 2011 and 2013, as part of an EB-5 Visa program. Northern Riverfront’s general partner was Wilmington Riverfront Development, LLC, managed by Charles Schoninger, the project’s lead developer. The investment offers to Plaintiffs were for five-year terms, making the last term’s expiration date February 18, 2018. Plaintiffs filed suit on December 13, 2021, claiming that their investments failed to provide the promised return and asserting, inter alia, claims for fraud, negligent misrepresentation, breach of fiduciary duties, breach of contract, and violations of the North Carolina Securities Act against a host of defendants, including Wilmington Riverfront and Schoninger. Defendants moved to dismiss the complaint in its entirety.

The court dismissed most of the claims with prejudice, largely on statute of limitations grounds. The fraud and securities violation claims were largely barred by the three-year statute of limitations because Plaintiffs were on notice of their claims long before 2021. For instance, despite the development plan to have a hotel operating by 2014, no hotel was ever built. With respect to Wilmington Riverfront and Schoninger, however, the court noted that Schoninger had written letters to investors in his role as managing member of Wilmington Development, updating them on the project’s status. These contained potential misrepresentations causing Plaintiffs to delay bringing their lawsuit. Therefore, those two defendants were equitably estopped from asserting a statute of limitations defense. Nevertheless, Plaintiffs failed to plead fraud with the particularity required under Rule 9, even after being given multiple opportunities to amend the complaint. Notably though, because Wilmington Development was estopped from invoking the statute of limitations, Plaintiffs’ breach of contract claims against it for an alleged transfer of property and failure to repurchase Plaintiffs’ partnership interests survived—the only significant claim to do so.

As to the breach of fiduciary duty claims, the court refused to find a de facto fiduciary duty owed by Northern Riverfront Marina and Schoninger. The court concluded that those Defendants did not “hold all the cards” with respect to the financial and technical knowledge of the project. Plaintiffs were sophisticated parties who all warranted that they were accredited investors, had access to information about the project, and understood English or had the offering circulars translated for them. Accordingly, those Defendants owed no fiduciary duties. Finally, the court concluded that Plaintiffs’ fiduciary claims against Wilmington Development as general partner should also be dismissed. The allegations that Wilmington Development breached its fiduciary duties to the limited partners were harms to the partnership as a whole, not individualized direct harms giving rise to a private cause of action under North Carolina law. Because no derivative claims were brought, all fiduciary duty claims were dismissed.

§ 2.3.14 Philadelphia Commerce Case Management Program

Antonio v. Wilmington Sav. Fund Soc’y, FSB (Grant of summary judgment in favor of lender dismissing class action alleging violation of Uniform Commercial Code). This is one of an increasing number of class actions in Philadelphia’s Commerce Court claiming that post-repossession automobile loan deficiency notices violate the UCC. When Antonio fell behind on her car payments, the Bank repossessed her vehicle, and sent her a “Notice of Repossession, Redemption Rights and Sale.” The Notice included a list of “Charges as of Date of Mailing” and directed Antonio to call the Bank for the exact redemption amount. Antonio did not redeem her vehicle, and the Bank sold it. Thereafter, the Bank informed Antonio that she still owed a deficiency.

Antonio filed a class action alleging that the Notice of Repossession, Redemption Rights and Sale violated the UCC and was misleading because it allegedly misstated the amount owed by Antonio. However, Judge Paula Patrick held that the Notice was not defective because the Notice directed Antonio to contact the Bank for the exact amount she needed to pay for the Bank to return her car. The UCC did not require the Bank to list every item owed by Antonio, and the Notice did not purport to be exhaustive. The UCC also did not mandate that the Notice be in a particular format. It was not misleading for the Notice to reference the possibility of additional costs, including the daily storage fee, which the Bank could easily determine, or repair costs, when there were none. Antonio could have called to learn the deficiency amount and its components.

Ambox Operations Co., LLC v. Pocklington (Grant of preliminary objections [motion to dismiss] in favor of defendant on the ground of judicial privilege). Philadelphia’s Commerce Court continues to frown upon “litigation about litigation.” Pocklington sued Randazzo, the principal of Ambox, for fraud over an investment. Ambox filed a retaliatory lawsuit using facts and language Pockington had averred against Randazzo. Ambox alleged that Pockington’s statements in his complaint were themselves false and tortious.

Judge Ramy I. Djerassi dismissed Ambox’s complaint on judicial privilege grounds, but also allowed Ambox to amend its claim for tortious interference with prospective economic advantage. Ambox declined, contending that there was no judicial privilege because the alleged false statements and tortious conduct by Pocklington predated his complaint against Randazzo. Judge Djerassi noted that traditionally judicial privilege applied to libel and slander claims. Emphasizing the broad scope of judicial privilege—and its grant of absolute immunity even to false or malicious communications made in the regular course of litigation—Judge Djerassi proceeded to extend judicial privilege protection to the alleged tortious interference by Pocklington in his pleading. Because Pocklington’s allegations in his pleading against Randazzo were privileged, Ambox could not use them as the basis for a tort claim against Pocklington. Absent those allegations, Ambox did not state a cause of action, and Judge Djerassi dismissed. In sum, judicial privilege bars a claim that allegations in a pleading are tortious and actionable.

LL Cap. Partners I, LP v. Tambur (Denial of stay of civil case pending resolution of alleged federal criminal investigation). Philadelphia’s Commerce Court remains skeptical of stay requests, even if occasioned by a possible related criminal action against a party. Tambur and other defendants sought a stay after learning that the U.S. Attorney’s Office and FBI served a subpoena on one of the plaintiffs and interviewed its CEO. Tambur was concerned about the government indicting him because of the fraud and other wrongdoing alleged by the plaintiffs, and about discovery in the civil case possible provoking the government. However, the government had not subpoenaed or interviewed Tambur. Tambur also proffered no evidence about the specific subject matter of any alleged investigation, how long the alleged investigation might take, or whether indictments might result. Nevertheless, Tambur sought an indefinite stay.

Judge Nina W. Padilla balanced (1) the overlap between the civil and criminal cases; (2) the status of any criminal case, including the indictment of Tambur; (3) the plaintiff’s interests in expeditious civil proceedings versus any prejudice caused to the plaintiff by the requested delay; (4) the burden on Tambur; (5) the interests of the court; and (6) the public interest. Judge Padilla concluded a stay was not warranted because (1) there was no actual criminal case; (2) any alleged criminal case was not advanced, and it was possible that no indictments would result; (3) discovery disputes had already prejudiced the plaintiff by significantly delaying the case; (4) the minimal burden on Tambur, who had already invoked his right not to incriminate himself, and the lack of any showing that Tambur could not defend himself in the civil case; and (5) the court and (6) the public’s interest in prompt adjudication of the civil case unless it interfered with any criminal case. At this point, Tambur’s concerns were speculative and entitled to little weight. However, Judge Padilla was open to re-visiting the situation should the circumstances change.

Skw-B Acquisitions v. Stobba Residential Assocs., L.P. (Grant of petition to appoint receiver). This is the rare case where Philadelphia’s Commerce Court imposed a receiver with broad powers to manage property. Loan documents required the defendant commercial borrowers to deposit rent payments into a bank account for the benefit of the lender. However, the borrowers defaulted by failing to make monthly payments, and then their loan matured. Thereafter, the borrowers instructed their tenants to direct their rent payments to the borrower’s operating account. The lender sued and filed an emergency petition for the appointment of a receiver because of the loss of two tenants and the declining condition of the property that was the collateral for the loan. The court refused, but the Superior Court [Pennsylvania’s intermediate appellate court] vacated. On remand, the lender renewed its petition and also alleged that the borrowers had misappropriated rent and mismanaged the property. This time, the court granted the petition.

Judge Paula Patrick observed that in Pennsylvania there is a stringent, cautious standard for the appointment of a receiver of a solvent business. The test is similar to that for injunctive relief. The court must be “absolutely certain” that a receiver is necessary to protect creditors. The appointment of a receiver cannot cause more harm than good, and there cannot be another less drastic remedy, such as damages. Judge Patrick emphasized that the borrowers were diverting funds to themselves, in violation of the loan documents. Furthermore, commercial vacancies at the property were increasing, much of the first floor of the property was empty, and several remaining commercial tenants had ceased to pay rent. Conditions at the property were deteriorating. The borrowers were not making meaningful efforts to find replacement tenants and they were behind on their taxes. A receiver was necessary to prevent the circumstances from further deteriorating, and in particular, to stop the misappropriation of funds. Judge Patrick included with her decision a comprehensive order that is a model for the scope of the authority and duties of a receiver for distressed property.

§ 2.3.15 Rhode Island Superior Court Business Calendar

MKG Beauty & Business, LLC et al. v. Independence Bank (commercially reasonable sales). Defendant Independence Bank moved for summary judgment on the remaining counts in the Verified Complaint filed by Plaintiffs MKG Beauty & Business, LLC, et al. Defendant also moved for summary judgment on its Counterclaim against Plaintiffs for the unpaid balance of a promissory note, plus reasonable attorneys’ fees and costs. Plaintiffs objected to both motions.

The primary issue addressed was “whether there exists a genuine issue of material fact that Defendant did not sell 395 Atwood in a commercially reasonable manner. Defendant argues that Plaintiffs have failed to provide any evidence that supports a finding that the sale price of $450,000 for 395 Atwood” was not commercially reasonable. “Conversely, Plaintiffs argue that ‘the sale price’ of $450,000 for 395 Atwood alone establishes that it was not sold in a commercially reasonable manner or, at the very least, creates a genuine issue of material fact as to the commercial reasonableness of the sale.”

“Under Rhode Island law, a mere discrepancy between a market value appraisal and a foreclosure sale price, without more, is not sufficient to establish that a transaction is commercially unreasonable.” “The primary focus of whether a sale is commercially reasonable ‘is not the proceeds received from the sale but rather the procedures employed for the sale.’”

“Defendant has presented substantial evidence to support a finding that … it sold 395 Atwood in a commercially reasonable manner. Notably, Defendant has provided competent evidence indicating that it was both ready and willing to accept private offers and that, by no fault of Defendant, both prospects failed.”

“[T]he only evidence that Plaintiffs have set forth in support of their position is the fact that 395 Atwood sold for less than its assessed value for property taxes. (Citation omitted). However, … selling a property at a value less than what it is appraised or assessed at is not enough” to make a case for commercial unreasonableness. “Plaintiffs have failed to present any evidence indicating collusion or impropriety on the part of Defendant with respect to accepting a sale price of $450,000.” “Plaintiffs have neither advanced expert appraisal regarding the value of 395 Atwood at the time of the public auction nor have Plaintiffs provided any other substantive grounds as to why $450,000 was insufficient. Moreover, Plaintiffs have provided no evidence that the procedures employed by Defendant were commercially unreasonable.”

“Furthermore, this Court finds that the unambiguous language of Section 9G of the Note supports a finding that no dispute exists as to Defendant’s liability to Plaintiffs for its failure to secure the FMV of 395 Atwood at the time of sale. Section 9G of the Note provides in part, ‘Borrower also waives any defenses based upon any claim that Lender did not...obtain the fair market value of Collateral at a sale.’ Plaintiffs, in their written or oral objections to the motion, have failed to provide any reason as to why this section should be ignored. Thus, viewing the evidence in the light most favorable to Plaintiffs, Plaintiffs have failed to show by competent evidence that a genuine issue of material fact exists as to the commercial reasonableness of the 395 Atwood sale.”

The Court also rejected the Plaintiffs’ claim that the workout deal amounted to a usurious loan. That deal called for the Plaintiffs to repay the original principal plus interest, surrender the properties without deduction on the loan balance, and enter the lease on one of the properties.

Beretta v. DeQuattro (breach of contract, breach of fiduciary duty). Plaintiff brought an action against the company (the “Company”) he was a shareholder of and the individual to whom Plaintiff transferred his shares in that entity for claims of breach of contract, breach of covenant of good faith and fair dealing, breach of fiduciary duty, indemnification, and seeking the appointment of a special master. The parties executed two separate agreements in 2009 and 2016 and under both agreements the Plaintiff agreed to transfer his shares in the company. A bench trial was conducted to determine which agreement controls. Providence Country Superior Court, Justice Brian P. Stern held: (1) “the 2016 Operating Agreement constitutes the entire agreement between the parties with respect to transitioning ownership of” the Company; (2) the Company “was intimately and closely managed by a small group of shareholders … like a partnership.” The Plaintiff and the Defendant “owed fiduciary duties toward one another and to [the Company] as shareholders of a close corporation”; (3) the Plaintiff “did not breach a fiduciary duty to disclose”; (4) “[h]aving found that [the Plaintiff] did not breach a fiduciary duty to disclose, there is no legally sufficient reason to unwind the 2016 Operating Agreement” and the Defendants’ counterclaims are without merit; (5) Defendant’s “actions in connection with the contractual dispute at bar did not constitute a breach of the duties of good faith or loyalty”; (6) Defendant “is in breach [of the 2016 Operating Agreement] by failing to adhere to its terms”; (7) Defendant did not breach the implied covenant of good faith and fair dealing; (8) the Plaintiff’s request for indemnification is denied; (9) the Plaintiff is awarded $404,797.50 in damages, “representing a 50 percent share of [the Company]’s accrued net income for calendar year 2018”; and (9) Plaintiff failed to prove damages with reasonable certainty regarding additional compensation for calendar year 2019, a 401(k) contribution for calendar year 2019, profit-sharing distributions for calendar year 2019 and his 50-percent share of the Company’s profits in calendar year 2018, and therefore “the Court does not award any damages for additional compensation.”

Wilson v. 2 Tower, LLC (breach of contract, fraud, breach of fiduciary duty). An individual brought claims against her two business partners and two entities she had an interest in for alleged breach of contract, fraud, and breach of fiduciary duty. Washington County Superior Court Judge Sarah Taft-Carter held that (1) Plaintiff’s claim for rescission of the Operating Agreement of 2 Tower, LLC on a theory of fraud and negligent misrepresentation failed due to the plaintiff’s failure to demonstrate reasonable or justifiable reliance on the alleged misrepresentation because the “weight of the credible evidence prove[d] otherwise”; (2) found Plaintiff suffered no damage for breach of the operating agreement’s notice requirement; (3) found for Plaintiff as to the claim of breach of promissory note in the amount $13,949.71; and (4) Plaintiff’s claim for breach of fiduciary duty fails (the operating agreement of 2 Tower, LLC permitted the sale of its assets with an affirmative vote of its members).

Jutonus, LLC v. Fiano (tax sale in violation of automatic stay). Jutonus, LLC, having won a property through a tax sale, petitioned the Superior Court to foreclose all rights of redemption. Prior to the tax sale the owner filed for Chapter 13 Bankruptcy and an automatic stay issued. Premier Capital, a creditor, held a writ of attachment that had issued and been recorded on the property prior to the initiation of the Chapter 13 bankruptcy and tax sale. Premier challenged the petition to foreclose all rights of redemption on the grounds that the tax sale violated the automatic stay. The Court held that a creditor had standing because the creditor’s imminent risk of divestment of its interest in the property is fairly traceable to the violation of the automatic stay. The Court further denied the request to foreclose the right of redemption due to the underlying tax sale violating the automatic stay and that the tax sale was invalid.

§ 2.3.16 West Virginia Business Court Division

The Thrasher Group v. Bear Contracting, LLC and Great American Insurance Company (Order Granting Defendant’s Motion for Summary Judgment Regarding Certain Diana Deck and Pike Fork Damage Counterclaims; Order Granting Defendant’s Motion for Summary Judgment Regarding Certain Diana Deck and Pike Fork Counterclaims). This case was referred to the Business Court Division on October 30, 2020, and involves three construction projects in which Bear Contracting, LLC and The Thrasher Group contracted together, wherein Bear Contracting, LLC was to provide construction services and the Thrasher Group was to provide engineering services for the two projects.

After hearing oral argument regarding Defendant Bear Contracting, LLC’s Motion for Summary Judgment Regarding Certain Diana Deck and Pike Fork Damage Counterclaims, on March 8, 2023, the Business Court Division granted Bear Contracting, LLC’s motion for summary judgment. Bear Contracting, LLC argued that it was entitled to certain damages that it incurred in completing the project, after The Thrasher Group’s termination, including inspection costs, survey layout costs, and right of way acquisition costs. The Thrasher Group argued that it had provided an itemized list of services in its pricing proposal, Bear Contracting, LLC agreed to the scope of the pricing proposals, and therefore, the disputed damages were outside of the scope of services which The Thrasher Group was to provide. Ruling in favor of Bear Contracting, LLC, the Business Court Division held that (1) The Thrasher Group could not bill for inspection services in addition to the lump sum payment owed under the contract, as inspection services were included in the lump sum payment; (2) Bear Contracting, LLC was entitled to $161,172.53 in replacement damages for inspection services; (3) Bear Contracting, LLC was entitled to $14,405.81 in damages for survey and layout work costs; and (4) Bear Contracting, LLC was entitled to either performance of right of way work or the costs of a subcontractor to complete right of way work. This case remains pending before the Business Court Division.

American Bituminous Power Partners v. Horizon Ventures of West Virginia (Order – Findings of Fact and Conclusions of Law from Bench Trial). This case was referred to the Business Court Division on January 10, 2019, and involves disputes arising from an amended lease agreement between American Bituminous Power Partners, L.P. (“AMBIT”) and Horizon Ventures of West Virginia, Inc. The original lease agreement allowed AMBIT to rent property from Horizon Ventures for the purposes of building a power plant, which would primarily use waste coal from the site to produce electricity. The original lease agreement required AMBIT to pay Horizon Ventures a certain amount of their gross revenues, depending on whether the fuel used at the power plant was “Foreign Fuel” or “Local Fuel” and whether it was used for “Operating” or “Non-Operating” reasons. The parties largely disagreed over the interpretation of a particular clause in the amended lease agreement, in which the parties defined all “Foreign Fuel” as “Non-Operating,” and in exchange, Horizon Ventures agreed that AMBIT would pay Horizon Ventures 2.5% of all gross revenues for the use of “Foreign Fuel” for “Non-Operating” reasons.

After being remanded to the Business Court Division from the West Virginia Supreme Court of Appeals, on October 10-12 of 2023, the Business Court Division held a three-day bench trial. The Business Court Division found that in the amended lease agreement the parties defined “Foreign Fuel” as “Non-Operating,” and in exchange the amended lease agreement did not contain a requirement that the “Local Fuel” be of any particular quality. Therefore, the amended lease agreement dispensed with any issue regarding the quality of “Local Fuel” used at the power plant. Resolving the disputes between the parties and interpreting the terms according to the amended lease agreement, the Business Court Division held that AMBIT owed Horizon Ventures of West Virginia 2.5% of gross revenues until all “Local Fuel” is used and no longer present on the site. This case remains pending in the Business Court Division.

Dallas Runyon, Sr. v. Citizens Telecommunications Company of West Virginia, Frontier West Virginia, Inc., and Appalachian Power Company (Order Denying Frontier’s Motion for Summary Judgment – Entered June 28, 2023) (Order Denying Plaintiff’s Motion for Partial Summary Judgment on Their Trespass and Unjust Enrichment Claims – Entered June 27, 2023). This case was referred to the Business Court Division on September 9, 2019, and involves a dispute regarding telecommunications utility poles placed on the plaintiff’s property.

On June 27, 2023, the Business Court Division entered an order denying Plaintiff’s Motion for Partial Summary Judgment on Their Trespass and Unjust Enrichment Claims. Then, on June 28, 2023, the Business Court Division entered another order denying Frontier’s Motion for Summary Judgment. In denying both motions, the court noted that the two easements were central to the litigation. While the plaintiffs alleged that the 2014 easement superseded the 1939 easement on the property, Frontier contended that the 2014 easement did not cancel the 1939 easement. Further, Frontier claimed that the plaintiff refused to sign a new easement, while the plaintiff claimed that a new easement was proffered to Frontier, but Frontier refused to agree to the proffered easement. The Business Court Division noted that due to the factual disputes, summary judgment was not appropriate.

§ 2.3.17 Wisconsin Commercial Docket Pilot Project

Nestlé USA, Inc. v. Advanced Boiler Control Services, et al. (Summary judgment related to insurance coverage). In Nestlé, the circuit court considered opposing motions for summary judgment related to insurance coverage filed by Plaintiff Nestlé and Defendants Cincinnati Specialty Underwriters Insurance Company (“Cincinnati”) and Evanston Insurance Company (“Evanston”). The underlying lawsuit arose out of an explosion at Nestlé’s factory that occurred during the performance of services by Advanced Boiler Control Services, Inc. (“ABC”). Nestlé sought a summary judgment ruling that there was coverage through Cincinnati’s Commercial General Liability (“CGL”) policy issued to ABC, and by extension coverage under Evanston’s excess policy. Cincinnati and Evanston sought a summary judgment ruling that coverage does not exist and that neither had a duty to defend or indemnify ABC. Ultimately, the court granted summary judgment to Nestlé. The court noted that insurance policies are contracts governed by the same rules of construction as any other, and that insurance coverage determinations are made using a three-step analysis. First, the court examines the claim to determine whether the policy makes an initial grant of coverage. If so, the court then determines whether any of the policy’s exclusions preclude coverage. Exclusions are narrowly and strictly construed against the insurer if their effect is uncertain. Last, if an exclusion applies, the court determines whether an exception to that exclusion reinstates coverage. The court emphasized that ambiguities as to coverage must be resolved in favor of the insured. Applying this analysis, the court determined that Nestlé had demonstrated initial coverage under the CGL, and that Cincinnati and Evanston did not prove that any of the asserted exclusions applied. The court was therefore not required to look at the exclusions’ exceptions. The court refrained from ruling on the merits as to one other defense: that any alleged misrepresentation made by ABC regarding the events leading up to the explosion and claimed investigation costs incurred by Nestlé were not covered. The court determined that any alleged misrepresentation would not relieve Cincinnati from its legal responsibility for such costs, but that Cincinnati could challenge the reasonableness of them if a jury found that ABC had made a misrepresentation which resulted in additional costs. The court instructed that that jury should be provided specific verdict forms to that effect.

§ 2.3.18 Wyoming Chancery Court

Clark v. Romo and Lincolnway v. Villalpando (Chancery Court’s limited jurisdiction). Both orders focused on statutory language granting the court limited jurisdiction over “disputes involving commercial [and] business . . . issues.” Wyo. Stat. § 5-13-115(a).

In Clark, the Chancery Court interpreted this statutory phrase to encompass “disputes among businesses, disputes between businesses and financial institutions, and disputes about business governance” while excluding disputes between business and consumers. Consequently, the court dismissed a complaint involving a consumer-business dispute.

In keeping with this definition, in Lincolnway, the court determined disputes involving private sellers—individuals not engaged in regular trade or business—fall beyond the court’s limited jurisdiction. Accordingly, the court dismissed a complaint filed by a corporation against private sellers.

These orders underscore the Chancery Court’s awareness of its unique yet limited role within Wyoming’s judicial system. They also signal the court’s commitment to strictly delineating its jurisdictional boundaries, maintaining a focus on business-to-business and trust cases.

Contributors to this publication include: Lee Applebaum (Editor Emeritus), Peter J. Klock, II, Tanisha Wright, Jonathan W. Hugg, Martin J. Demoret, Amber Crow, Marcus Weymiller, Alan M. Long, Eviana Englert, Laura A. Brenner, Olivia Schwartz, Edward J. Hermes, Christian Fernandez, Russell F. Hilliard, Nathan C. Midolo, Gregory D. Herrold, Benjamin M. Burningham, Emanuel L. McMiller, Elizabeth A. Charles, Douglas L. Toering, Brian Markham, Jacqueline A. Brooks, Kiana Givpoor, Benjamin R. Norman, Daniel L. Colston, Agustin M. Martinez, Patrick A. Guida, Jennifer M. Rutter, Marc E. Williams, Allyssa Kimbler, Michael J. Tuteur, Morgan McDonald, Muhammad U. Faridi, and Jacqueline Bonneau.