Justia U.S. 1st Circuit Court of Appeals Opinion Summaries

Plaintiff obtained a $23 million judgment against a Corporation. Plaintiff sought to secure payment on that judgment by filing suit in federal district court against the Corporation’s president and its corporate parent, alleging that Defendants had looted the Corporation of more than $18 million in assets in order to render it judgment-proof. After Plaintiff learned that one of the Corporation’s corporate parents planned to merge with an Austrian subsidiary, the district court issued a temporary restraining order, later converted into a preliminary injunction, barring the merger. Defendants nevertheless effected the merger. The district court issued civil contempt sanctions on Defendants for violating the court’s preliminary injunction order. Plaintiff subsequently moved for default judgment based on Defendants’ assertion that they had no intention of complying with the contempt order. The district court entered judgment for Plaintiff and awarded $75 million to Plaintiff. The First Circuit affirmed, holding (1) the district court properly exercised personal jurisdiction over Defendants; (2) Plaintiff’s complaint adequately stated valid causes of action for, inter alia, tortious interference with contractual relations and veil piercing; (3) the district court did not abuse its discretion in entering default judgment as a sanction for Defendants’ discovery violations; and (4) the district court did not err when it entered a damage award without an evidentiary hearing. View "AngioDynamics, Inc. v. Biolitec AG" on Justia Law

Plaintiff obtained a $23 million judgment in New York against a New Jersey corporation ("Corporation") with its principal place of business in Massachusetts. Plaintiff sought to secure payment on that judgment by bringing suit in the District of Massachusetts against the Corporation’s president and its corporate parents, alleging that Defendants had looted BI of more than $18 million in assets in order to render it judgment-proof. Plaintiff later learned that one of BI’s corporate parents planned to merge with an Austrian subsidiary, which would place the company’s assets out of Plaintiff’s reach. The district court issued a temporary restraining order, later converted into a preliminary injunction, barring the merger. Defendant unsuccessfully moved to vacate the injunction and then appealed. While the appeal was pending, Defendants effected the merger. The district court issued civil contempt sanctions on Defendant for violating the court’s preliminary injunction order. The First Circuit affirmed, holding that the district court (1) did not exceed the bounds of its authority when it imposed the civil contempt sanctions; and (2) did not err when it declined to vacate the underlying preliminary injunction. View "AngioDynamics, Inc. v. Biolitec AG" on Justia Law

This shareholder derivative suit was one of several suits alleging that Smith & Wesson Holding Corporation, a major gun manufacturer incorporated in Nevada, made misleading public statements in 2007 about demand for its products. In reaction to these cases, Smith & Wesson formed a Special Litigation Committee (SLC) to investigate and evaluate the viability of any of these claims and to make a recommendation to Smith & Wesson’s Board whether to pursue any of these claims. The SLC issued a final report recommending against filing any claims. In 2010, Plaintiff asserted Nevada state law claims against Smith & Wesson’s officers and directors, including breach of fiduciary duty and waste of corporate assets. On the basis of the SLC’s conclusions, Defendants, former and current officers and directors of Smith & Wesson, moved for summary dismissal under Delaware law, as adopted by Nevada. The district court granted the motion. The First Circuit affirmed, holding that the district court did not err in finding as a matter of law that the SLC was independent and that the SLC’s investigation was reasonable and conducted in good faith. View "Sarnacki v. Golden" on Justia Law

After T G Plastics Trading Co., Inc. (“National Plastics”) allegedly fell behind on payments owed to Toray Plastics (America), Inc., Toray filed suit. The parties settled the lawsuit, and the terms of the settlement were memorialized in a Settlement Agreement. The Settlement Agreement provided that Toray would sell certain materials exclusively through National Plastics and pay National Plastics a twelve percent commission on all sales generated by National Plastics. When the parties began to dispute several aspects of the application of the Settlement Agreement, National Plastics sued Toray. The original complaint did not contain a jury demand. After two years of settlement negotiations, National Plastics amended its complaint to request a jury trial. A jury found Toray liable for breach of the Settlement Agreement and awarded National Plastics more than $2 million in damages. The First Circuit affirmed, holding (1) the district court did not err in allowing National Plastics to amend its complaint to add a jury demand, as National Plastics did not waive its right to a jury trial by a belated demand; and (2) the evidence was sufficient to support the jury’s finding of liability and its calculation of damages. View "T G Plastics Trading Co., Inc. v. Toray Plastics (America), Inc." on Justia Law

Alasko Foods, Inc. (“Alasko”), a Canadian corporation that sells frozen produce to retail outlets, and Foodmark, Inc. (“Foodmark”), a Massachusetts corporation that assists food manufacturers in marketing branded-label and private-label products to retailers, entered into a “U.S. Representation Agreement [and] Sales Management Agreement” wherein Alasko retained Foodmark to market Alasko’s products in the United States. Five years later, Alasko terminated the Agreement. Foodmark filed a complaint against Alasko, alleging that Alasko’s refusal to pay the “Non-Renewal Termination Fee” contemplated by the Agreement constituted a breach of the Agreement and of its covenant of good faith and fair dealing. A federal district court entered summary judgment for Foodmark and awarded $1.1 million in damages. The First Circuit affirmed, holding that there were no genuine issues of fact, and Foodmark was entitled to a termination fee in the amount calculated by the district court. View "Foodmark, Inc. v. Alasko Foods, Inc." on Justia Law

Plaintiffs, holders of PHC, Inc. stock, filed separate but similar class actions suits in Massachusetts, alleging that an announced merger between PHC and Acadia Healthcare Company, Inc. was the result of an unfair process that provided them with too little compensation. A federal district court consolidated the two cases and, after the merger was consummated, granted summary judgment for Defendants, concluding that Plaintiffs were unable to demonstrate that they suffered an actual injury. The First Circuit vacated the judgment of the district court, holding that the court abused its discretion by not allowing discovery before ruling on the motion for summary judgment. Remanded.View "MAZ Partners LP v. PHC, Inc." on Justia Law

At issue in this appeal was a tax credit that offset federal tax owed on income earned in the operation of a business in Puerto Rico. The credit remained available to taxpayers under section 936 of the Internal Revenue Code during the ten-year transition period after section 936 was repealed. During the transition period, the taxable income an eligible claimant could claim in computing its credit was capped at an amount approximately equal to the average of the amounts it had previously claimed, but the cap could be adjusted for a taxpayer’s purchases and sales of businesses that had generated credit-eligible income. In this case, Appellant-corporation, a U.S. taxpayer, sold a line of businesses in Puerto Rico to a foreign corporation that did not pay U.S. corporate income taxes. Appellant argued it was not required to reduce its cap because the buyer had no credit cap to increase. The district court granted summary judgment for the government. The First Circuit reversed, holding (1) the reduction in a seller’s cap as a result of the sale of a business line is appropriate only in the event of a corresponding increase in the buyer’s cap; and (2) therefore, the transfers did not reduce Appellant’s credit cap. View "OMJ Pharms., Inc. v. United States" on Justia Law

Defendant, a citizen and resident of Puerto Rico, borrowed $700,000 from Plaintiff, a citizen and resident of Greece. Plaintiff’s loan was not evidenced by "even a single scrap of paper." The parties subsequently disputed who the borrower was, whether Caribbean Carrier Holding (Panama), Inc., as Defendant claimed, or Defendant, as Plaintiff claimed. When the parties could not agree on the identity of the borrower, Plaintiff brought a collection action against Defendant in the United States District Court for the District of Puerto Rico. The district judge ruled that Plaintiff had not sustained his burden of proof and entered judgment for Defendant. The First Circuit Court of Appeals affirmed, holding that the district judge (1) substantially complied with the requirements of Fed. R. Civ. P. 52(a)(1), and (2) applied the correct substantive law standard in adjudicating Plaintiff’s claim. View "Valsamis v. Gonzalez-Romero" on Justia Law

After Westernbank of Puerto Rico was ordered closed in the late 2000s and the Federal Deposit Insurance Corporation (“FDIC”) was appointed receiver, the FDIC discovered that certain bank directors and officers had breached their fiduciary duty by jeopardizing the bank’s financial soundness, causing over $176 million in damages to the bank. The directors and officers asked their insurer, Chartis Insurance Company, to confirm coverage under a directors’ and officers’ liability-insurance policy issued by Chartis to Westerbank’s owner, W Holding Company, Inc. Chartis denied coverage. The directors and officers and the FDIC sued Chartis. In this “procedurally complicated” case, a district judge eventually issued an order requiring Chartis to advance defense costs to the directors and officers. The First Circuit Court of Appeals affirmed, holding (1) the Court had jurisdiction to hear the parties; and (2) the district judge did not err in making its cost-advancement ruling. View "W Holding Co., Inc. v. AIG Ins. Co. - P.R." on Justia Law

HSBC Realty Credit Corporation loaned Brandywine Partners, LLC $15.9 million pursuant to a property-loan agreement for the purchase and development of industrial property in Delaware. J. Brian O’Neill, a principal of Brandywine, signed an absolute personal guaranty for the loan. O’Neill’s liability was capped at $8.1 million. After Brandywine defaulted on its repayment obligations, HSB filed suit on the guaranty agreement. O’Neill filed several defenses and counterclaims essentially asserting that HSBC must first recover any amount owed by Brandywine by proceeding against the Delaware property before turning to O’Neill’s personal guaranty. The district judge struck O’Neill’s defenses and counterclaims, granted HSBC judgment on the pleadings, and denied O’Neill’s request to replead. The First Circuit Court of Appeals affirmed, holding that the district court judge did not commit reversible error in granting HSBC judgment on the pleadings or in denying O’Neill leave to replead, as O’Neill did not provide any additional facts which, if repled, would permit him to make out a plausible claim for relief when matched up against the guaranty’s express language. View "HSBC Realty Credit Corp. v. O'Neill" on Justia Law