Latest 7 Cases This Week: Wells Fargo, N.A. v. Bear Stearns & Co., Inc. (3d Cir.), Correct RX Pharmacy Services Inc. v. Cornerstone Automation ...

Taking Stock: A Review of Justice Stevens’s Last Book and an Appreciation of His Extraordinary Service on the Supreme Court

RODGER CITRON

Rodger D. Citron, the Associate Dean for Research and Scholarship and a Professor of Law at Touro College, Jacob D. Fuchsberg Law Center, comments on the late Justice John Paul Stevens’s last book, The Making of a Justice: Reflections on My First 94 Years. Citron laments that, in his view, the memoir is too long yet does not say enough, but he lauds the justice for his outstanding service on the Supreme Court.

Read More

Wells Fargo, N.A. v. Bear Stearns & Co., Inc.

Court: US Court of Appeals for the Third Circuit

Docket: 18-2887

Opinion Date: December 24, 2019

Judge: Smith

Areas of Law: Bankruptcy, Business Law, Commercial Law

HomeBanc, in the residential mortgage loan business, obtained financing from Bear Stearns under 2005 repurchase agreements and transferred multiple securities to Bear Stearns. In 2007 HomeBanc failed to repurchase the securities or pay for an extension of the due date. Bear Stearns issued a notice of default. HomeBanc filed voluntary bankruptcy petitions. Bear Stearns, claiming outright ownership of the securities, auctioned them to determine their fair market value. After the auction closed, Bear Stearns’s finance desk determined that Bear Stearns’s mortgage trading desk had won. Bear Stearns allocated the $60.5 million bid across 36 securities. HomeBanc believed itself entitled to the August 2007 principal and interest payments from the securities. HomeBanc claimed conversion, breach of contract, and violation of the automatic bankruptcy stay. Following multiple rounds of litigation, the district court found that Bear Stearns acted reasonably and in good faith. The Third Circuit affirmed. A bankruptcy court’s determination of good faith regarding an obligatory post-default valuation of collateral subject to a repurchase agreement receives mixed review. Factual findings are reviewed for clear-error while the ultimate issue of good faith receives plenary review. Bear Stearns liquidated the securities at issue in good faith compliance with the Repurchasing Agreement. Bear Stearns never claimed damages; 11 U.S.C. 101(47)(A)(v) “damages,” which may trigger the requirements of 11 U.S.C. 562, require a non-breaching party to bring a legal claim for damages. The broader safe harbor protections of 11 U.S.C. 559 were relevant.

Correct RX Pharmacy Services Inc. v. Cornerstone Automation Systems, LLC

Court: US Court of Appeals for the Fifth Circuit

Docket: 18-11387

Opinion Date: December 19, 2019

Judge: James L. Dennis

Areas of Law: Business Law

Correct Rx filed suit against CASI after CASI failed to deliver a custom automated pharmacy system by a specified deadline. Correct Rx alleged a Texas common law tort claim for negligent misrepresentation based on various alleged misstatements CASI had made over the course of their dealings regarding its experience, resources, and capabilities. The jury found in favor of Correct Rx. The Fifth Circuit affirmed, holding that the district court correctly determined that Texas's economic loss rule did not preclude Correct Rx's tort claim. The court held that Correct Rx established a breach of an independent duty and an independent injury within the meaning of Texas law. Therefore, Correct Rx's recovery was not precluded by the Texas contractual economic loss rule.

Ex parte Valley National Bank.

Court: Supreme Court of Alabama

Docket: 1180055

Opinion Date: December 13, 2019

Judge: Stewart

Areas of Law: Business Law, Civil Procedure, Corporate Compliance

Valley National Bank ("VNB") petitioned the Alabama Supreme Court for a writ of mandamus to direct directing the trial court to dismiss a declaratory-judgment action filed against VNB by Jesse Blount, Wilson Blount, and William Blount. William owned a 33% interest in Alabama Utility Services, LLC ("AUS"). William also served as the president of WWJ Corporation, Inc. ("WWJ"), and WWJ managed AUS. Wilson and Jesse, William's sons, owned all the stock of WWJ. In May 2013, William transferred his 33% interest in AUS to WWJ, and WWJ then owned all the interest in AUS. In July 2015, VNB obtained a $905,599.90 judgment against William in an action separate from the underlying action. On August 31, 2015, Asset Management Professionals, LLC, purchased from WWJ all the assets of AUS for $1,600,000. On July 17, 2018, the Blounts filed a declaratory judgment action seeking a judgment declaring "that a) William's transfer of his interest in AUS to WWJ was not fraudulent as to [VNB], b) William was not the alter ego of AUS or WWJ, c) the sale of AUS did not result in a constructive trust in favor of [VNB], and d) the [Blounts] did not engage in a civil conspiracy." VNB filed an action under the Alabama Uniform Fraudulent Transfer Act against the Blounts and others in which it asserted that William had fraudulently transferred assets and sought to pierce the corporate veil of WWJ. After review of the trial court records and documents submitted by the parties, the Alabama Supreme Court determined VNB did not demonstrate a clear legal right to have claims against them dismissed. The court denied the mandamus petition insofar as it sought dismissal of the alter-ego claim and the constructive-trust claim.

Ciccarello v. Davies

Court: Idaho Supreme Court - Civil

Docket: 46340

Opinion Date: December 23, 2019

Judge: Roger S. Burdick

Areas of Law: Business Law, Corporate Compliance, Legal Ethics

Mark Ciccarello formed a company named F.E.M. Distribution, LLC for the purpose of marketing and selling a product line called “Lotus Electronic Cigarettes.” In 2013, Ciccarello faced federal criminal charges related to his operation of another business that sold and marketed synthetic cannabinoids. As a result of the federal charges, some of F.E.M.’s assets were seized by the federal government. To prevent further seizure of F.E.M.’s remaining assets, Ciccarello contacted attorney Jeffrey Davies; Ciccarello and Davies discussed options for safeguarding F.E.M.’s assets, which included the possible sale of F.E.M. to another company. Davies drafted documents to form two new companies, Vapor Investors, LLC, and Baus Investment Group, LLC, which collectively owned Lotus Vaping Technologies, LLC. Davies put together a group of investors. The members of Vapor and Baus orally agreed with Ciccarello that he would receive $2 million and a majority ownership interest in Baus in exchange for the sale of F.E.M.’s assets to Lotus, the shares to be held by Bob Henry until Ciccarello's federal problems concluded. F.E.M. was sold to Lotus, and Ciccarello continued to act as CEO and manage operations. In January 2014, the federal government issued a letter stating it had no further interest in Ciccarello’s involvement in Lotus. Ciccarello requested his shares in Baus be returned and that the sale documents be modified to reflect him as the owner of the Baus shares. However, this was never done. In June 2014, Ciccarello was incarcerated due to his federal criminal case. Lotus ceased making monthly payments to Ciccarello in July 2014 and never resumed. At some point in 2014, Ciccarello was also ousted from Lotus by its members and Bob Henry took over his role as CEO. In April 2016, Ciccarello sued Lotus, Vapor, Davies, Henry, and several other investors involved in the sale of F.E.M. to Lotus, seeking recovery of damages Ciccarello alleged he suffered as a result of the structure of the sale. Ciccarello’s claims against Davies was negligence claims asserting legal malpractice. Shortly after Ciccarello made his expert witness disclosure, Davies moved for summary judgment, arguing that even if Davies represented Ciccarello at the time of the F.E.M. sale, Davies was not negligent in his representation. After review, the Idaho Supreme Court determined the district court did not err in granting summary judgment in favor of Davies, denying Ciccarello’s motion for reconsideration, or denying Ciccarello’s motion for relief under Idaho Rule of Civil Procedure 60(b).

Gomez v. Crookham

Court: Idaho Supreme Court - Civil

Docket: 45542

Opinion Date: December 20, 2019

Judge: Moeller

Areas of Law: Agriculture Law, Business Law, Labor & Employment Law, Personal Injury, Products Liability

Francisca Gomez died as the result of a horrific industrial accident while she was cleaning a seed sorting machine as part of her employment with the Crookham Company (“Crookham”). Her family (the Gomezes) received worker’s compensation benefits and also brought a wrongful death action. The Gomezes appealed the district court's decision to grant Crookham’s motion for summary judgment on all claims relating to Mrs. Gomez’s death. The district court held that Mrs. Gomez was working within the scope of her employment at the time of the accident, that all of the Gomezes’ claims were barred by the exclusive remedy rule of Idaho worker’s compensation law, that the exception to the exclusive remedy rule provided by Idaho Code section 72-209(3) did not apply, and that the Gomezes’ product liability claims failed as a matter of law because Crookham was not a “manufacturer.” In affirming in part and reversing in part, the Idaho Supreme Court determined the trial court erred when it failed to consider whether Crookham committed an act of unprovoked physical aggression upon Mrs. Gomez by consciously disregarding knowledge that an injury would result. As such, the matter was remanded to the district court for further proceedings.

In re Murrin Brothers 1885, Ltd.

Court: Supreme Court of Texas

Docket: 18-0737

Opinion Date: December 20, 2019

Judge: Blacklock

Areas of Law: Business Law, Legal Ethics

In this dispute between the Hickman Group and the Murrin Group asserting the right to control the management of Billy Bob's the Supreme Court denied the Murrin Group's petition for writ of mandamus challenging the trial court's denial of its motion to disqualify Kelly Hart & Hallman (KHH) as counsel for Billy Bob's Texas Investments (BBT) and as counsel for the Hickman Group, holding that the Murrin Group did not establish a clear abuse of discretion as to the motion to disqualify. The Murrin Group filed the underlying lawsuit against the Hickman Group asserting claims individually by the members of the Murrin Group and claims asserted derivatively on behalf of BBT. KHH was hired to represent both the Hickman Group and BBT in the litigation. The Murrin Group moved to disqualify KHH as counsel for both BBT and the Hickman Group and filed a Rule 12 motion requiring KHH to show its authority to represent BBT. The trial court denied both motions. The Murrin Group sought mandamus relief. The Supreme Court denied relief, holding (1) the trial court properly denied the motion to disqualify; and (2) the Murrin Group did not establish the lack of an adequate remedy at law as to the Rule 12 motion.

Commercial Construction Endeavors, Inc. v. Ohio Security Insurance Company

Court: Vermont Supreme Court

Citation: 2019 VT 88

Opinion Date: December 13, 2019

Judge: Eaton

Areas of Law: Business Law, Civil Procedure, Construction Law, Insurance Law, Real Estate & Property Law

On a winter night in 2014, strong winds blew through the town of Georgia, Vermont, causing a partially constructed livestock barn to collapse. Commercial Construction Endeavors, Inc. (CCE), the contractor building the barn, sought recompense for the resulting losses from its insurer, Ohio Security Insurance Company. However, insurer and insured disagreed as to policy coverage for costs incurred by CCE in removing the remains of the collapsed barn and rebuilding it to its pre-collapse state. Ultimately, CCE sued Ohio Security for breach of contract. In successive summary-judgment rulings, the trial court held that the contractor’s rebuilding expenses were covered under the policy, but the cost of debris removal was not. Ohio Security cross-appealed the first ruling and CCE appealed the second; the Vermont Supreme Court reversed the first ruling and affirmed the second. The Court determined the additional collapse coverage applied only to “Covered Property,” which was business personal property; CCE did not dispute that the barn was not business personal property and thus was not “Covered Property.” Therefore, the court’s first summary-judgment ruling was reversed. The debris removal was not a loss involving business personal property. As a result, it was not a loss to “Covered Property” at that term was defined by the policy at issue.