Recent Developments in Business Courts 2021


Lee Applebaum

Fineman, Krekstein & Harris, P.C.
1801 Market Street, 11th Floor
Philadelphia, PA 19103
[email protected]

Benjamin R. Norman

Brooks, Pierce, McLendon, Humphrey & Leonard LLP
2000 Renaissance Plaza
230 North Elm Street
Greensboro, NC 27401
[email protected]


Brett M. Amron
Peter J. Klock, II

Bast Amron LLP
SunTrust International Center
1 Southeast Third Avenue, Suite 1400
Miami, FL 33131

Andrew Anderson
Stacie Gonsalves Linguist
Monika Sehic

Faegre Drinker Biddle & Reath LLP
801 Grand Avenue, 33rd Floor
Des Moines, IA 50309

Lee Applebaum

Fineman Krekstein & Harris, P.C.
1801 Market Street, Suite 1100
Philadelphia, PA 19103

Alan W. Bakowski

Troutman Pepper Hamilton Sanders LLP
600 Peachtree Street, NE Suite 3000
Atlanta, GA 30308

Laura A. Brenner
Jeunesse M. Rutledge

Reinhart Boerner Van Deuren, SC
1000 N. Water Street, Suite 1700
Milwaukee, WI 53202

Jacqueline A. Brooks
Lelia F. Parker

Saul Ewing Arnstein & Lehr LLP
Lockwood Place, 500 East Pratt Street
Suite 900
Baltimore, MD 21202

George F. Burns
Eviana Englert

Bernstein, Shur, Sawyer & Nelson, PA
100 Middle Street
Portland, ME 04104

Joseph F. Caputi
Gregory D. Herrold
Stephen J. Brody

Duane Morris LLP
1940 Route 70 East, Suite 100
Cherry Hill, NJ 08003

Emily T. Dodane
Emanuel L. McMiller

Faegre Drinker Biddle & Reath LLP
300 N. Meridian Street, Suite 2500
Indianapolis, IN 46204

Woods Drinkwater

Nelson Mullins Riley & Scarborough LLP
One Nashville Place
150 Fourth Avenue, North
Suite 1100
Nashville, TN 37219

Patrick A. Guida
Duffy & Sweeney LTD

321 South Main Street, Suite 400
Providence, RI 02903

Edward J. Hermes
Alysha Green

Snell & Wilmer LLP
400 East Van Buren Street, Suite 1900
Phoenix, AZ 85004

Russell F. Hilliard
Nathan C. Midolo

Upton & Hatfield LLP
159 Middle Street
Portsmouth, NH 03801

Matthew Kaufman
Jerry James

Hathaway & Kunz, LLP
2515 Warren Avenue, Suite 500
Cheyenne, WY 82003

Douglas L. Toering
Nicole B. Lockhart

Mantese Honigman, PC
1361 E. Big Beaver Road
Troy, MI 48083

Benjamin R. Norman
Daniel L. Colston

Brooks, Pierce, McLendon, Humphrey & Leonard LLP
2000 Renaissance Plaza
230 North Elm Street
Greensboro, NC 27401

Thomas Rutledge

Stoll Keenon Ogden PLLC
500 West Jefferson Street, Suite 2000
Louisville, KY 40202

Jennifer Rutter

Gibbons P.C.
300 Delaware Avenue, Suite 1015
Wilmington, DE 19801

Michael J. Tuteur
Andrew C. Yost

Foley & Lardner LLP
111 Huntington Avenue, Suite 2600
Boston, MA 02199

Marc E. Williams
Alex C. Frampton

Nelson Mullins Riley & Scarborough LLP
949 Third Avenue, Suite 200
Huntington, WV 25701

Stephen P. Younger
Muhammad U. Faridi
Louis M. Russo

Patterson Belknap Webb & Tyler LLP
1133 Avenue of the Americas
New York, NY 10036

§ 1.1 Introduction

The 2021 Recent Developments describes developments in business courts and summarizes significant cases from a number of business courts with publicly available opinions.[1]

There are currently functioning business courts of some type in cities, counties, regions, or statewide in twenty-four 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; and (24) Wisconsin.[2]  Wyoming has established a Chancery Court, which is not yet operational at the time of this writing in 2020.[3]  States with dedicated complex litigation programs encompassing business and commercial cases, among other types of complex cases, include California, Connecticut, Minnesota, and Oregon.[4]  The California and Connecticut programs are expressly not business court programs as such.[5

§ 1.2 Recent Developments

§ 1.2.1 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.[6]  The ACBCJ’s Fifteenth Annual Meeting took place in Savannah, Georgia from October 28, 2020 to October 30, 2020.[7]  Like much else in 2020, the meeting focused on COVID-19’s impact.  Among other topics, the meeting addressed shareholder value, business interruption insurance and COVID-19, the impacts of emergency relaxation of licensing and other regulatory requirements in response to COVID-19, state court receiverships in light of COVID-19’s economic impact, docket and court resource management, pharmaceutical regulation, and force majeure and frustration of contract.

Section, Committee, and Subcommittee Resources.  In 2020, The Business Lawyer’s 75th Anniversary edition published two articles on business courts.  The first article, Through the Decades: The Development of Business Courts in the United States of America,[8] by attorneys Lee Applebaum, Mitchell Bach, Eric Milby and Richard Renck, completes a trilogy of Business Lawyer articles on the history and development of business courts.[9]  The second, an essay by Michigan business court judge Christopher P. Yates, The ABA’s Contribution to the Development of Business Courts in the United States,[10] provides an overview of the Section of Business Law’s 25-year involvement in developing business courts.

The Section of Business Law has created a pamphlet, Establishing Business Courts in Your State.[11]  The Business and Corporate Litigation Committee’s Subcommittee on Business Courts provides 150 documents and/or hyperlinks to business court resources.[12]  This includes links to public sources and legal publications, as well as business court related materials and panel discussions presented at ABA Section of Business Law meetings.  The Section’s Judges Initiative Committee also provides links to business court resources, such as judicial opinions published by various business courts, and standardized forms used in business and complex litigation courts. [13]  The Section also has established a Business Courts Representatives (BCR) program,[14] 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.  The Section also has a Diversity Clerkship Program that sponsors second year law students of diverse backgrounds in summer clerkships with business and complex court judges.[15]  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 have developed an innovative training curriculum[16] and faculty guide[17] – along with practical tools – to help state courts establish and manage business court dockets more efficiently and effectively.”[18]  The Business Courts Blog[19] 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,[20] as well as recent developments in business courts.  In 2020, in addition to the two Business Lawyer articles mentioned above, there were other articles and reports addressing some aspects of business courts.[21]  There are also various legal blogs addressing business courts in particular states.[22]

§ 1.2.2 Developments in Existing Business Courts

Arizona Commercial Court

In 2019, the Commercial Court became a permanent part of the Arizona judicial system after operating as a pilot program since 2015.[23]  The Commercial Court hears cases seeking monetary relief in excess of $300,000 that involve business organizations or business transactions.[24]  Both plaintiffs and defendants can request assignment to the Commercial Court, and it is mandatory that all qualifying cases proceed in Commercial Court.[25]

There were no substantial changes to the structure or rules of the Commercial Court in 2020.  In a year of countless unknowns and unanticipated delays, as courts nationwide transitioned from in person hearings to remote proceedings, the Commercial Court carried on.  In 2020, the Commercial Court heard matters ranging from contract disputes regarding commercial lease spaces[26] to temporary injunctions challenging executive orders in the wake of COVID-19.[27]  While still in its infancy, the Commercial Court has become an indispensable part of Arizona’s judicial process.

Florida’s Complex Business Litigation Courts

Regular readers of this update will recall that the Ninth Judicial Circuit’s complex business litigation (CBL) court re-opened last year after a one-year closure due to funding limitations.  With the re-opening of the court, the Ninth Judicial Circuit took the opportunity to revise the jurisdiction of its sole CBL court.[28]  The original administrative order establishing the court’s jurisdiction provided for blanket jurisdiction over eleven general case types without any minimum amount-in-controversy requirements (and also specifically identified certain case types that are not generally assigned to the CBL division).  The amended administrative order now provides for jurisdiction over 16 case types (but makes no changes to the list of specifically excluded case types), the majority of which have a $500,000 minimum amount-in-controversy threshold.[29]  Additionally, the order provides that, for those cases with an amount-in-controversy requirement, plaintiffs must set forth the actual amount at issue in the matter in their complaint, rather than simply pleading that the amount at issue is in excess of the threshold.[30]

As it was last year, Florida is lucky enough to have six circuit court divisions dedicated to resolving CBL.  Florida’s six CBL judges are spread across Orange County (Ninth Judicial Circuit), Miami-Dade County (Eleventh Judicial Circuit), Hillsborough County (Thirteenth Judicial Circuit), and Broward County (Seventeenth Judicial Circuit).  The judges currently assigned to hear CBL cases are: Judge John E. Jordan (Division 01) in Orlando,[31] Judges Michael A. Hanzman (Division 43) and William Thomas (Division 44) in Miami,[32] Chief Judge Jack Tuter (Division 07) and Judge Patti Englander Henning (Division 26) in Fort Lauderdale,[33] and Judge Darren D. Farfante (Division L) in Tampa.[34]  Judges Michael A. Hanzman and John E. Jordan began their respective CBL assignments during 2020, and Judge Darren D. Farfante began his CBL assignment in January 2021.

Cases may be directly filed or reassigned/transferred to a complex business division based on a number of factors, including: the nature of the case; complexity of the issues; complexity of discovery; number of parties in the case; and specific criteria enumerated by each circuit.

Indiana Commercial Courts

In August 2020, the Indiana Office of Court Services created a new beta search engine for substantive Indiana Commercial Court Orders.[35]  The database allows users to narrow their search by date and the specific commercial court.  Users are encouraged to provide feedback, as the 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 topics such as case management conferences, discovery, and trial preparation, and including sample case documents and forms.[36]

On January 1, 2021, Indiana’s Commercial Court expanded to four new counties, bringing the total number of counties with a Commercial Court to ten.[37]

Iowa Business Specialty Court

The goal of the Iowa Business Specialty Court (Iowa Business Court) is to provide litigants with an expeditious and cost-effective court system where parties and their attorneys can have their cases heard before one of five judges with business litigation experience.[38]  The Iowa Business Court became a component of the Iowa court system in 2016.[39]  Since its inception, the Iowa Business Court has disposed of 69 cases and approximately 37 cases are pending.[40]

A case is eligible for the Iowa Business Court if it meets or exceeds $200,000 in compensatory damages or the claim primarily seeks injunctive or declaratory relief.[41]  The case must also meet one of nine dispute types, including but not limited to business disputes involving breach of contract, fraud, or misrepresentations and tort claims between or among business entities.[42]

Starting January 1, 2020, the State Court Administrator is expected to report findings from annual reviews and make recommendations for the Iowa Business Court’s improvement to the Iowa Supreme Court.[43]

Michigan Business Courts

In response to the Coronavirus pandemic, the Michigan Supreme Court issued nineteen administrative orders addressing modifications to court protocol.[44]  Perhaps the most noteworthy is Administrative Order 2020-6 (AO 2020-6), dated April 7, 2020.[45]  This requires all Michigan judges to “conduct proceedings remotely whenever possible using two-way interactive videoconferencing technology…,” like Zoom.  The effects of AO 2020-6 hit Michigan courts almost overnight.[46]  In fact, the statewide justice system surpassed one million hours of Zoom hearings in six months.[47]  Today, Zoom proceedings have become common practice for Michigan courts, including business courts, with Zoom proceedings ranging from status conferences to motion hearings and bench trials.  Douglas L. Toering polled many of the Michigan business court judges on their use of Zoom for the Michigan Business Law Journal.  The consensus was clear: Zoom proceedings are “here to stay.”[48]

To address various concerns about court proceedings via Zoom, the Michigan State Court Administrative Office released the Michigan Trial Courts Virtual Courtroom Standards and Guidelines on April 7, 2020 (revised August 5, 2020).[49]  These guidelines recommend that courts and parties agree in advance as to how exhibits will be displayed to witnesses.  Additionally, the revised guidelines address concerns as to potential witness coaching.  Courts may now, sua sponte, order parties to readjust cameras so that all present persons are visible.  AO 2020-6 directly addressed Michigan’s backlogged dockets stemming from this public health crisis by directing that “all matters…proceed as expeditiously as possible under the circumstances….”  This is consistent with one of the purposes of the Michigan business court statute, which is to resolve business disputes with the “expertise, technology, and efficiency required by the information age economy.”[50]  Opinions from the Michigan business court judges continue to be posted on a comprehensive website, which includes twenty-five categories of business court opinions.  In February 2020, a new category, “Discovery,” was added.

New York Commercial Division

Justice Robert Reed Appointed to New York County Commercial Division.  On October 5, 2020, just days after Justice Peter Sherwood and Justice Marcy Friedman announced their upcoming retirements from the bench, the Chief Administrative Judge announced the news that Justice Robert Reed would join the New York County (Manhattan) Commercial Division.  Justice Reed started hearing cases in the Court in October 2020.[51]

Rule 11-g Amended to Include “Attorneys Eyes Only” Designation.  On September 23, 2020, Chief Administrative Judge Marks amended Commercial Division Rule 11-g and the Division’s Standard Form Confidentiality Order (SFO) to allow parties to designate certain documents as highly confidential for attorney’s eyes only (AEO).  Such a designation already exists in federal court, and it will be useful in the Commercial Division in matters involving particularly confidential issues such as the disclosure of confidential business information between competitors and disclosure of trade secrets.[52]

Rule 6 Amended to Require Hyperlinking in Documents.  On September 29, 2020, Chief Administrative Judge Marks amended Commercial Division Rule 6, effective November 16, 2020.  The amendments consist of adding subsections (b) and (c) concerning the use of hyperlinks and bookmarks in electronically filed documents.[53]  Hyperlinking is to external documents, and bookmarks link to other parts of the same document.  Hyperlinking to docketed documents is required unless those documents are under seal.  In addition, a court “may require that electronically submitted memoranda of law include hyperlinks to cited court decisions, statutes, rules, regulations, treatises, and other legal authorities in either legal research databases to which the Court has access or in state or federal government websites.  If the Court does not require such hyperlinking, parties are nonetheless encouraged to hyperlink such citations unless otherwise directed by the Court.”

Philadelphia Commerce Court’s Temporary Financial Monitor Program in Response to COVID-19 Business Crisis

Philadelphia’s Court of Common Pleas has considerable experience in creating programs responsive to financial crises.[54]  In that tradition, a new program has been created in Philadelphia’s Commerce Court, the Temporary Financial Monitor Program.  This program will use volunteer lawyers and accountants as Temporary Financial Monitors (TFM) “to provide assistance to keep local enterprises operational,” during the COVID-19 pandemic.  There is a petition process for bringing troubled businesses and their creditors into the program.  Once a matter is initiated, the TFM “shall be responsible for evaluating the financial information provided by the petitioning entity and, upon consultation with the entity and its creditors, shall prepare a proposed Operating Plan to enable the entity to resume and/or continue operations while paying off its accumulated debts.”

The program will be under Commerce Court Supervising Judge Gary S. Glazer’s general supervision.  The Court’s enabling Order[55] observes that the Commerce Court has jurisdiction over “disputes between or among two or more business entities and handles dissolution and liquidation of business entities,” and “takes judicial notice that the COVID-19 pandemic has caused significant economic harm to local for-profit businesses and non-profit institutions, many of which were forced to close for lengthy periods of time and have been unable to generate sufficient income to pay their debts or retain their staff, and it appears that the current economic climate threatens their ability to operate in the future….”

The enabling Order has six parts: (1) “Establishment and Eligibility of the Monitor Program”; (2) “Assignment to Monitor the Program”; (3) “Information to be included in the Petition”; (4) “Court Review and Assignment of Temporary Financial Monitor”; (5) “Duties and Obligations of Temporary Financial Monitor”; and (6) “Termination or Conclusion of Assignment of Temporary Financial Monitor”.  

Rhode Island Superior Court Business Calendar Non-Liquidating Receivership Program, and Protocols during COVID-19 Pandemic

On March 31, 2020, Rhode Island Superior Court Presiding Justice Alice Gibney entered an Order allowing the Superior Court Business Calendar to administer a more measured response to the COVID-19 crisis in the form of a business protection/recovery program, designated the “COVID-19 Non-Liquidating Receivership Program.”[56]  The purpose of the Program is to allow the Business Calendar of the Superior Court to supervise and provide protection from creditors through injunctive relief for eligible Rhode Island business entities in order that they might remain operational while seeking new capital and rearranging their debt structure.  This is not, however, a debt discharge program.

Under the Order, a business entity, including a sole proprietorship, which was not in default of its obligations as of January 15, 2020, may voluntarily seek to be petitioned into a Non-Liquidating Receivership, whereby the business entity may demonstrate eligibility for the Program, have a Temporary Non-Liquidating Receiver appointed, and while protected by a Superior Court injunction and stay order, proceed to secure the approval of the Superior Court of a “Recommended Operating Plan,” whereupon the Temporary Non-Liquidating Receiver may be appointed as the permanent Non-Liquidating Receiver to administer the Program.  During the non-liquidating receivership, management remains in place and must develop an operating plan to address its pre-receivership debts and continue to pay current debts as they become due.  If the business defaults on its plan, the court may convert the case to a liquidating receivership.  The ultimate objective being that a Receivership Business might exit the Non-Liquidating Receivership as a viable continuing business under order of the Superior Court.

On the same date of March 31, Presiding Justice Gibney also entered an Order identifying the Program Coordinators, who under Section 8(b) of the Order are assigned to interface with members of the Bar to assist business entities in entering the Program, and to provide other services relating thereto.

On April 21, 2020, Rhode Island Superior Court Business Calendar Justices Brian P. Stern and Richard A. Licht issued an Order setting forth “Protocols” for “Providence and Out-County Business Calendars—Proceedings during COVID-19 Crisis.”[57]  This order provides the procedural rules for matters to be considered on the Superior Court business calendar.  All matters are to be done remotely.  Parties may request that a matter be decided on the pleadings.  If a matter cannot be determined on the pleadings, the hearing will be held remotely by WebEx Videoconferencing.  Parties may also request a conference with a judge by emailing the request to the judge’s clerk.  Conferences will also be held by WebEx Videoconference.

Tennessee Business Court

This year, the Tennessee Administrative Office of the Courts, in collaboration with the National Center for State Courts and the State Justice Institute, developed and released an innovative curriculum and training guide designed to help states establish and manage business court dockets.[58]  The curriculum was developed as part of Tennessee’s Business Court Docket Pilot Project, which was initially established in 2015 to address complex corporate and commercial cases.[59]

The training program will help other states that are embarking on the creation of their own business courts by providing them with a blueprint for managing their own business court dockets.

West Virginia Business Court Division

In the past year, 14 motions to refer cases to the West Virginia Business Court Division were filed.  Of these, 10 were granted.  Since its inception, there have been 179 motions to refer filed, with a total of 103 of those motions granted.  The Business Court Division has resolved 86 of these.  Currently, there are 17 cases pending before the Business Court Division with an average age of 451 days.[60]

Wisconsin Commercial Docket Pilot Project

On April 11, 2017, Wisconsin’s Supreme Court issued an order creating a “pilot project for dedicated trial court judicial dockets for large claim business and commercial cases.”[61]  The order includes an appendix with interim rules.[62]  A majority of the court approved the pilot project, with a written dissent from two of the seven justices.  The original three-year pilot program began on July 1, 2017, and was established in Waukesha County and in Wisconsin’s Eighth Judicial Administrative District.[63]  In February 2020, the program was extended to 2022 to include the Second and Tenth Judicial Districts and Dane County.[64]  The commercial docket pilot program may be expanded in the future to other Wisconsin counties and districts.  The new court rules allow for cases outside these regions to be heard within the new docket, subject to the discretion of the chief judge within the regions.

The new docket includes both mandatory and discretionary case assignment.  There are seven categories of cases subject to mandatory assignment.  These include: (1) internal business organizational claims; (2) prohibited business activity (e.g., “tortious or statutorily prohibited business activity, unfair competition or antitrust . . . claims of tortious interference with a business organization; claims involving restrictive covenants and agreements not to compete or solicit; claims involving confidentiality agreements”); (3) business sale/ consolidation/ merger; (4) sale of securities; (5) intellectual property rights; (6) franchisor/ franchisee claims; and (7) UCC claims greater than $100,000.[65]  The categories of cases were expanded in 2020 to include (8) receiverships in excess of $250,000; (9) confirmation of arbitration awards and compelling/enforcing arbitration awards; and (10) cases involving commercial real estate construction disputes over $250,000.  There is also a specific list of excluded cases, including consumer claims, claims where a government entity is a party, and disputes involving enforcement of various civil rights, environmental, and tax statutes and regulations.[66]  Discretionary inclusion exists for cases that are neither expressly mandatory nor excluded.  Under the new rules, parties may jointly move the chief judge of the judicial administrative district in which the Commercial Court sits for discretionary assignment of a case to the Commercial Court docket.  The chief judge of the judicial district shall consider the parties to the dispute, the nature of the dispute, the complexity of the issues presented, and whether the Commercial Court’s resolution of the case will provide needed guidance to influence future commercial behavior or assist in resolving future disputes.[67]  The chief judge’s decision cannot be appealed.

The rules set out the parties’, judges’, and court clerks’ roles in case assignment, and the court has created forms to be used in connection with commercial docket cases.  A training program for clerks of court has been initiated so that they better recognize when a case qualifies as a commercial case under the program.  The pilot program also establishes recommended customs and practices for judges assigned to the commercial court dockets including ESI awareness and case management, timing of mediation, early consideration of protective orders, regular status conferences, and written published decisions.

Since its inception in 2017, the commercial docket has handled 103 total cases, 69 of which are now closed.[68]  The commercial docket has published sixteen decisions, ten from 2019 and 2020 alone.[69]  The vast majority of the cases have dealt with prohibited business activities or internal business organization (71 of 103) and have been resolved within six months of filing (48 of 61).

§ 1.2.3 Other Developments

State-wide Business Court in Georgia Begins Operations

Georgia’s new State-wide Business Court officially began its operations in 2020, with Judge Walter W. Davis serving as the first judge of the court.[70]  The State-wide Business Court has jurisdiction to hear a wide variety of claims relating to disputes involving corporations, partnerships, or other business entities, including those arising under Georgia’s Uniform Commercial Code, Uniform Securities Act, Business Corporation Code, and Trade Secrets Act.[71]  Cases involving only claims for damages must have an amount-in-controversy of at least $500,000 ($1 million for cases involving commercial property) to fall within the jurisdiction of the State-wide Business Court.  Cases may be filed directly with the State-wide Business Court or transferred to the State-wide Business Court from another state court if one or more parties files a petition for transfer within 60 days after service of a pleading that is within the jurisdiction of the State-wide Business Court.[72]  The State-wide Business Court began accepting case filings on August 1, 2020 but has not yet issued any substantive opinions.  Proposed rules for the State-wide Business Court were developed by an eight-person rules commission consisting of private lawyers, judges, and a law professor, and these rules must be approved by the Georgia Supreme Court before taking effect.[73]  The State-wide Business Court does not replace the Metro Atlanta Business Case Division, which continues to adjudicate business disputes in Fulton and Gwinnett Counties.

Kentucky’s Business Court Docket

Kentucky began its experiment with the business courts with the Business Court Docket of the Jefferson County Circuit Court, it becoming effective January 1, 2020.  While it is anticipated that the Business Court Docket of the Jefferson Circuit Court will be emulated in other counties, no additional steps have yet been taken in that direction, no doubt consequent to both the early stage of the effort in Jefferson County (which comprises Louisville, the largest city in the state) and as well the COVID-19 pandemic of 2020.  Currently, the judges on the Business Court Docket are Charles Cunningham and Angela McCormick-Bisig.  Only cases filed on or after January 1, 2020 have been eligible for assignment to the Business Court Docket.  Through October 30, 2020, sixty-nine cases have been assigned to the Business Court Docket.  For example, as of the end of August, cases currently pending included:

  • a breach of contract action against a municipal authority with respect to roadwork;
  • a dispute between a homeowners association and a condo owner with respect to short-term leases;
  • challenges to noncompetition limitations in an employment agreement;
  • several actions for breach of real estate lease agreements;
  • a dispute over a lease of the commercial hauling vehicle;
  • trademark infringement with respect to sport official uniforms;
  • a dispute between a subcontractor and the general contractor with respect to work performed on an elementary school renovation;
  • an action for breach of an employment agreement and violation of wage and hour laws based upon failure by a defendant to pay the plaintiff;
  • an action for breach of a real estate purchase agreement and specifically the failure to pay taxes due; and
  • an action for breach of contract and fraud in the failure to install swimming pools.

Substantive descriptions of the Business Court Docket are published on the Business Court Docket webpage of the Kentucky Department of Justice website.[74]  The only decision published to date was rendered by Judge McCormick-Bisig in the case of Isco Industries, Inc. v. O’Neill.[75]  In a judgment entered on June 2, 2020, a temporary injunction was denied in connection with a suit brought based upon the defendant’s alleged violation of the terms of certain restrictive covenants he entered into as an employee of the plaintiff, that denial of the injunctive relief being based upon the plaintiff’s failure to carry its burden.

Pennsylvania Legislation to Create Statewide Appellate and Trial Level Commerce Courts

Pennsylvania’s Legislature unanimously adopted legislation,[76] Senate Bill 976, to create Commerce Courts in the Superior Court of Pennsylvania, an intermediate appellate court, as well as in Pennsylvania’s trial courts, the Courts of Common Pleas.  Senate Bill 976 was submitted to Governor Wolf on October 26, 2020, and signed into law on November 3, 2020.[77]  This new statute creates the first appellate business court in the United States.  It ultimately remains within each court’s discretion, however, whether to create Commerce Courts within their jurisdictions.

Pennsylvania has two existing business courts.  The Philadelphia Court of Common Pleas has a twenty-year-old Commerce Case Management Program,[78] and the Allegheny County Court of Common Pleas in Pittsburgh has had its Commerce and Complex Litigation Center[79] since 2007.[80]  The new law should not require any changes in these well-established programs.  The legislation also gives Pennsylvania’s Supreme Court authority to create an advisory council, and the position of Commerce Court coordinator to work with the Courts of Common Pleas in establishing and developing Commerce Courts.

The legislation includes identical subject matter jurisdiction for the appellate and trial level Commerce Courts, identifying two basic areas: (1) a wide range of internal business disputes and (2) “disputes between or among two or more business enterprises relating to a transaction, business relationship or a contract.”  This contrasts to some degree with the more detailed list of case types used to define subject matter jurisdiction in Philadelphia’s Commerce Court, but the basic concept is the same, i.e., jurisdiction is limited to business and commercial disputes only.  Both the Superior Court and Courts of Common Pleas may adopt rules governing their Commerce Courts, but these rules must be consistent with the general rules of court established by Pennsylvania’s Supreme Court.  The new statute also makes clear that it does not alter the Superior Court’s jurisdiction.

Notably, the legislature is neither going to provide additional funding for any of these Commerce Court programs, nor for the coordinator position or advisory committee.

Wyoming Chancery Court

In March 2019, the Wyoming Legislature established the Chancery Court of the State of Wyoming.[81]  The Wyoming Supreme Court has been vested with the overall creation, management, supervisory powers, and the authority to promulgate rules of civil procedure for the new chancery court by January 1, 2020.[82]

With rulemaking underway through the newly created Chancery Court Committee, which was created and appointed by the Wyoming Supreme Court and made up of Judges, practitioners, court clerks, and various representatives from State Government, Wyoming is actively building out an administrative framework for Wyoming Chancery Court launch within the next two years.

The Wyoming Chancery Court is a court of limited jurisdiction, hearing cases related only to commercial, business, trust disputes or disputes relating to topics as discussed below.[83]  The court is further limited to presiding over cases where the relief sought is in equity, declaratory relief or monetary damages in excess of $50,000 excluding punitive or exemplary damages, attorneys’ fees, costs, etc.[84]  In addition, matters coming before the court must be accompanied with a filing fee of no less than $500.[85]  The Wyoming Chancery Court strives for an efficient and expeditious disposition of matters before the court and as such, cases are to be resolved within one hundred and fifty (150) days from the date of filing.[86]  As a result of such expeditious resolution of disputes, the Wyoming Chancery Court provides no supplemental jurisdiction to claims that are not specifically covered in the statute.[87]  The chancery court shall comprise of a maximum of three (3) judges who meet the statutory requirements to preside over matters coming before the court.[88]  However, initially the Wyoming Supreme Court is enabled to employ a panel of sitting District Court Judges to serve as the initial Chancery Court Judges.  Pending Wyoming legislation may extend the allowable use of this panel until 2026.[89]

Though the new Wyoming Chancery Court’s jurisdiction is limited in nature, the scope of matters the court may preside over includes a wide variety of legal topics such as breach of contract, fraud, misrepresentation, environmental insurance coverage, transactions governed by the UTC and commercial class actions, securities, corporate law, and general business matters, to name a few.  Additionally, the court may preside over cases related to entity dissolutions, but the monetary minimum in such cases is waived by the court.[90]

The Wyoming Rules of Civil Procedure for Chancery Court take effect November 15, 2020, and provide litigants with ample resources to resolve all their commercial and business disputes, including an electronic database to search cases and matters resolved in the court and advanced courtroom technology for remote attendance by participants.[91]  Given the plethora of attractive corporate features Wyoming provides for businesses, adding this new chancery court feature should propel more corporate action in the Equality State.

§ 1.3 2020 Cases

§ 1.3.1 Arizona Commercial Court

Mountainside Fitness Acquisitions, LLC v. Ducey[92] (Demonstrating the diversity of commercial disputes adjudicated by the Commercial Court, which include issues of Constitutional law).  In response to the Coronavirus pandemic, the State of Arizona issued Executive Order 2020-43, which provided that “indoor gyms and fitness clubs or centers had to pause operations until at least July 27, 2020” and further required the gyms, clubs, and centers to “complete and submit” a state health department form proving their “compliance with guidance issued by [the health department] related to COVID-19 business operations.”  The form did not “give fitness centers an opportunity to re-open during any mandatory shutdown period.  Rather, gyms that fill out the form must attest that they will remain closed through any mandatory shutdown periods.”  Mountainside Fitness, a gym operating in Arizona, challenged the Executive Order, arguing that it violated their “Constitutionally-protected post-deprivation procedural due process rights and substantive due process rights” and sought injunctive relief.

The Commercial Court first considered whether gyms had a Constitutionally protected property interest to conduct business.  The Court answered affirmatively.  The Court found that “the government forcing a business to shut down indefinitely, to the point where it might not be able to survive, implicates a property interest.”  Having found a Constitutionally protected interest, the Court considered the “unprecedented” nature of the Executive Order to determine that it was neither legislative or quasi-legislative, thus requiring the State to afford the businesses due process.  The Court reasoned that the State had not afforded the gyms procedural due process, as there was no “system for applying to reopen” but had satisfied the requirements of substantive due process, because there was “some rational basis” for the Executive Order.  Upon weighing the hardships and determining the indefinite nature of the gym closures, the Court ordered the state to provide the gyms post-deprivation due process in the form of an opportunity to apply for reopening.

§ 1.3.2 Delaware Superior Court Complex Commercial Litigation Division

Specialty Dx Holdings v. Lab. Corp. of Am. Holdings[93] (Active participation in litigation will waive a contractual right to arbitration).  In Specialty Dx Holdings, the parties entered into an asset purchase agreement containing an arbitration clause.  The plaintiffs originally filed an action in the Delaware Court of Chancery for breach of contract.  After the defendant filed a motion to dismiss one of five counts relating to the breach, and it was fully briefed by the parties, the Court of Chancery transferred the case to the Superior Court’s CCLD.  The Superior Court ordered supplemental briefing on the motion to dismiss, held a hearing, and issued an extensive opinion staying the dismissal pending arbitration.  Two months later, the defendant filed a second motion to dismiss.  In its second motion to dismiss, the defendant argued for the first time that the court lacked subject matter jurisdiction over the remaining counts for breach due to the asset purchase agreement’s arbitration clause.  Specifically, it argued that lack of subject matter jurisdiction due to an arbitration agreement cannot be waived.  The court expressly rejected this argument.  Although Delaware’s policy strongly supports the resolution of matters through arbitration, the court will not allow parties to waste the court’s limited resources and “test the waters” through litigation before asserting their contractual right to arbitration.  The court reiterated that the goal of arbitration is to secure the speedy and efficient resolution of disputes, which is not how the defendant proceeded here.  Therefore, although the court agreed that the additional counts were subject to arbitration, it held that the defendant waived its right to arbitration through its litigation conduct.

Infomedia Group, Inc. v. Orange Health Solutions, Inc.[94] (Sophisticated parties’ agreements to limit their reliance to contractual interpretations will be enforced).  Pursuant to an asset purchase agreement, the buyer purchased the seller’s rights and obligations under a series of service contracts.  In performing its due diligence, the buyer specifically asked the seller whether any of its customers had expressed an intent to change or terminate their contracts as a result of the proposed sale.  On several occasions during negotiations, the seller represented to the buyer that it was not aware of any such issues.  But two weeks before signing the asset purchase agreement, the seller had in fact received oral notice from a customer that it intended to terminate its contract.  Under the terms of the asset purchase agreement, however, the seller only represented that it had not received written notice from any customers of an intent to terminate their contract.  Because the contract contained an anti-reliance clause, and the parties to the agreement were sophisticated, the court held that the buyer could not state a claim for fraudulent inducement or negligent misrepresentation based on extra-contractual representations.  “Rather, sophisticated parties are free to limit the possibility of future claims of fraud or misrepresentation by contractually specifying what representations the parties are and are not making and relying upon.”  This decision upholds Delaware’s firm public policy against fraud while preserving its abundant body of precedent enforcing sophisticated parties’ contracts as written.

Ferrellgas Partners L.P. v. Zurich Am. Ins. Co.[95] (Reasonable invoices for fees can be submitted in support of declaratory judgment enforcement).  In Ferrellgas Partners L.P., the plaintiffs sought declaratory relief against their insurance companies for the alleged breach of director and officer liability policies based on the insurance companies’ failure to pay defense costs in excess of $1,000,000.00.  The court granted the plaintiffs’ motion for partial summary judgment requiring one of the defendant insurance companies to advance and reimburse the plaintiffs’ defense expenses for the underlying litigation.  When the insurance company failed to make those payments, the plaintiffs renewed their previous request for declaratory relief rather than seek a rule to show cause as to why the insurance company should not be held in contempt for failure to comply with the court’s order requiring payment.  The court again held that the plaintiffs are entitled to advancement for reasonable fees, and that the burden is on the advancement claimant to prove the reasonableness of the fees.  It did not require the insured to further seek the entry of a final monetary judgment to enforce its rights.  Notably, the court detailed the exact procedure to be used for advancement requests going forward by referring to the well-established and time-tested protocol used in the Delaware Court of Chancery.[96]  The court required the parties to follow the Fitracks-style protocol of invoice submission, review, and dispute resolution going forward and for those invoices to be unredacted to the greatest extent possible.

§ 1.3.3 Florida’s Complex Business Litigation Courts

In Re: Assignment for the Benefit of Creditors of Miami Perfume Junction, Inc.[97] (Power to hold and assert attorney- and accountant-client privileges passed from assignors to Chapter 727 assignee upon executions of assignments for the benefit of creditors).  Four insolvent companies executed assignments for the benefit of creditors pursuant to Chapter 727, Florida Statutes.  Although the assignments expressly included all company books, records, and electronic data, the assignors subsequently challenged their assignee’s ability to review pre-assignment communications between assignors and their counsel and accountants, as well as the assignee’s right to subpoena privileged communications from the assignors’ former counsel.  After the assignee moved for a ruling from the court on the issue, Judge William Thomas of the 11th Judicial Circuit’s Complex Business Litigation division granted the assignee’s motion and found that control of the privileges passed to the assignee by virtue of the assignments.  In coming to his decision, Judge Thomas considered the purpose of Chapter 727 and the nature of a Chapter 727 assignee’s duties, and found that the assignee would be unable to fully or effectively discharge his obligations without full and complete access to all books, records, and communications of the corporation.  The assignors appealed the ruling to the Third District Court of Appeal, which denied their petition for writ of certiorari.

Luzinski v. Bond[98] (Chapter 727 assignee can, on behalf of assignor corporation, bring claims in Florida where forum selection clause provides that corporation may consent to jurisdiction outside of Delaware).  An insolvent Delaware corporation headquartered in Hillsborough County, Florida executed an assignment for the benefit of creditors under Chapter 727.  When the assignee brought claims for breach of fiduciary duty against the former officers and directors of the assignor in Hillsborough County, the defendants moved to dismiss on the basis of a forum selection clause in the assignor’s articles of incorporation.  The clause provided that Delaware was the exclusive jurisdiction for certain types of claims, including claims against the officers and directors, but that the corporation could consent to litigating such claims in other venues.  Arguing that the assignee was not empowered to take what the defendants alleged were the “general corporate acts” of bringing the claim and consenting to jurisdiction outside of Delaware, the defendants urged Judge Scott Stephens of the 13th Judicial Circuit’s Complex Business Litigation Division to dismiss the case for improper venue.  During the hearing on the motion to dismiss, Judge Stephens found that the ability to consent to the suit being brought in a particular place passed to the assignee with the execution of the assignment, and denied the motion to dismiss.  The defendants have appealed the ruling to the Second District Court of Appeal.

§ 1.3.4 Indiana Commercial Court

Frontier Prof’l Baseball, Inc. v. Murphy[99] (Denying defendant’s motion to dismiss for lack of personal jurisdiction).  In Frontier, defendant Ysursa, an attorney licensed in Illinois and Missouri, had served as outside counsel to Frontier from 2009 until early 2019.  Frontier sought advice from Ysursa, during the course of a shareholder derivative action in an Indiana federal court.  Despite advising Frontier that he could not represent it because he was a potential witness and recommending the selection of Murphy as litigation counsel, Ysursa continued to provide substantive advice for the duration of the federal case.  On January 4, 2019, Frontier filed a legal malpractice action in Indiana Commercial Court against multiple defendants including Ysursa, as a result of the defendants’ handling of the federal court action.

On August 5, 2019, the Court denied Ysursa’s Motion to Dismiss for Lack of Personal Jurisdiction.  The Court found that while Ysrusa may not have had a substantial number of contacts with Indiana prior to or even during the federal lawsuit, his alleged involvement related directly to the actions which constituted the malpractice that was said to have occurred during that lawsuit.  Although he did not appear in the matter, he was heavily involved in drafting a report and providing an affidavit that was used in support of Frontier’s failed summary judgment motion in the federal case.  The Court found that Ysursa’s act of knowingly offering assistance in a case being adjudicated in Indiana constituted sufficient minimum contacts for finding personal jurisdiction over any claims arising from that assistance.  The Court also noted that Indiana had an interest to oversee malpractice claims that arose out of Ysursa’s specific actions in Indiana.

In the same Order, the Court also denied defendant’s Motion for Summary Judgment which was based on the argument that Frontier was not the real party in interest.  The Court found that there was contractual language identifying Frontier as the client in any subsequent malpractice cases and that Frontier stood to receive amounts from the judgment or settlement award, even though any award would first go to the litigation coordinator until his legal costs were satisfied.  The fact that Frontier permitted another party to control the direction of the malpractice litigation did not prevent Frontier from being the real party in interest.

On December 12, 2019, the Court granted Ysursa’s Motion to Certify the August 5th Order for Interlocutory Appeal.[100]  Despite its previous ruling that the facts and case law supported a finding of personal jurisdiction, the Court agreed that the issue presented a substantial question of law.  Although there were appellate opinions providing guidance on when an out-of-state attorney’s conduct might subject them to Indiana’s personal jurisdiction, there had not been any appellate decisions analyzing when an out-of-state attorney serving as inside counsel to a business involved in Indiana litigation may become subject to Indiana’s personal jurisdiction as a result of their representation.  The Court held that this lack of clarity affects attorneys serving as inside counsel to multi-state companies, especially for attorneys practicing on areas bordering other jurisdictions.  The Indiana Court of Appeals affirmed the Commercial Court’s decision to deny the motion to dismiss.

Walters v. Andy Mohr Auto. Group, Inc.[101] (Denying defendants’ combined motion to dismiss based on the alter ego doctrine and standing).  In Walters, plaintiffs filed a class action against a group of automotive dealerships alleging violation of the Indiana Deceptive Consumer Sales Act, constructive fraud, and unjust enrichment.  Each of the plaintiffs purchased or leased a vehicle from one of the named automotive dealerships and alleged that the itemized documentation preparation fee (Doc Fee) included in the total purchase price was inflated.  The plaintiffs further alleged that seventy-seven of the defendants (in addition to the dealerships involved directly in the transactions) operated as alter egos of each other and as a single business enterprise with respect to the charging of the alleged unlawful Doc Fee.  The defendants filed a motion to dismiss based on the alter ego doctrine and standing.

The court analyzed the sufficiency of the complaint under Trial Rule 12(B)(6).  First, the court evaluated whether plaintiffs pled sufficient facts to support their alter ego claims against the defendants that were not involved directly in the transactions at issue.  The court noted that—as alleged by plaintiffs—the Alter Ego Defendants and the Transaction Defendants: (1) shared similar corporate names; (2) shared overlapping offices; (3) had similar business purposes; and (4) often had the same phone number and certain shared offices.  Based on these factors, the court held that the plaintiffs demonstrated a claim under the alter ego doctrine, making dismissal improper.

Second, the court analyzed whether plaintiffs lacked standing to pursue claims against the Alter Ego Defendants.  The court held that the plaintiffs did have standing as they demonstrated a personal stake in the outcome of the lawsuit and that they sustained some direct injury as a result of the conduct at issue.  Additionally, the court held that the juridical link doctrine did apply in this case.  The plaintiffs’ complaints specifically alleged the class action was a result of numerous individuals suffering an identical injury at the hands of several defendants related by way of a conspiracy or concerted scheme surrounding dealership Doc Fees.  Further, the complaints alleged in detail how the defendants were juridically linked together such that neither Transaction Defendants nor Alter Ego Defendants should be dismissed.

On September 16, 2020, the court granted defendants’ motion to certify its July 31, 2020 Order for interlocutory appeal.[102]  To date, the appeal remains pending.

First Fin. Bank v. TA Partners, LLC[103] (Granting plaintiff’s partial motion for summary judgment holding a valid savings clause existed).  Throughout July 2019, First Financial Bank (tenant) failed to timely pay rent as required by its lease with TA Partners, LLC (landlord).  On July 23, 2019, TA Partners, LLC notified First Financial Bank that their lease was being terminated and that TA Partners, LLC was accelerating rent for the balance of the term and demanding payment of the accelerated rent.  First Financial Bank field suit for declaratory judgments and breach of contract.  Both parties filed cross-motions for partial summary judgment.

The court analyzed whether the lease had a valid savings clause, and whether the tenant accrued liability for future rent following the landlord’s termination of the lease.  First, the court held that the lease contained a valid savings clause.  The general rule in Indiana is that after termination of a lease, all liability under the lease for future rent is extinguished.  However, an exception to the general rule applies when the lease includes a savings clause that expressly states that the landlord is entitled to future rents after the termination of the lease.  Based on Indiana law and the court’s reading of the lease, the court held that the savings clause was clear and unambiguous that the landlord could recover accelerated unpaid rent in the event of default.

Additionally, the court analyzed whether evidence submitted with TA Partners, LLC’s partial motion for summary judgment, including emails and prior drafts of the lease, should be excluded as inadmissible parol evidence.  The court noted that under Indiana law extrinsic evidence may be considered only if the language of a contract is ambiguous.  However, Indiana law is clear that a written instrument governs, and evidence of prior negotiations, and evidence of such matters as prior expectations and conversations, cannot be allowed to alter its terms.  Therefore, the court held that any reference to prior drafts of the lease was inadmissible.

§ 1.3.5 Iowa Business Specialty Court

EMC Ins. Group, Inc. v. Shepard[104] (Perfection of statutory appraisal rights).  In EMC Insurance Group, Inc. v. Shepard, pursuant to a merger, the Court reviewed summary judgment motions relating to a merger and the sale of the defendant Gregory M. Shepard’s (Shepard) minority shares and his failure to perfect his appraisal rights.  Employers Mutual Casualty Company (EMCC) purchased 1.1 million shares of stock from Shepard, who was the largest single minority shareholder of EMC Insurance Group, Inc. (EMC).  EMC argued that Shepard failed to perfect his appraisal rights because he did not obtain consent from the legal titleholder of his shares, Cede & Co. (Cede), prior to the date of the merger.

The first issue in front of the Business Court was one of statutory interpretation where the Court had to determine the scope of what persons or entities are the registered titleholders in a corporation’s records under Iowa Code § 490.1301(8).  Specifically, the court analyzed whether Shepard did not obtain the required consent because he obtained consent from Morgan Stanley Smith Barney, LLC (Morgan Stanley), which held corporate records in “street name” as holder of Shepard’s 1.1 million shares instead of Cede.

The court entered summary judgment for EMC and concluded the record shareholder is the person whose name is registered in the records of the corporation, and those records do not include participants such as brokers.  Accordingly, because Shepard did not obtain written consent to assert his appraisal rights from Cede, he failed to perfect his rights as required by Iowa law.

The second issue the court reviewed was whether EMC waived and/or was equitably estopped from arguing Shepard failed to comply with the strict requirements of the appraisal provision because EMC did not comply with statute and concealed material facts from Shepard to his detriment.  The court found that Shepard did not establish facts in support of his motion for summary judgment on either of his defenses.

First, Shepard argued that EMC waived any challenges to his appraisal rights because it did not strictly comply with the appraisal statute.  The court disagreed and concluded EMC complied with its obligations by sending Shepard a notice acknowledging EMC’s receipt of Shepard’s intent to seek appraisal rights and advising Shepard what he needs to do to seek those rights.

Second, Shepard argued that EMC concealed its belief that the consent obtained from Morgan Stanley was insufficient to perfect his appraisal rights, and because EMC knew he intended to exercise his appraisal rights, Shepard’s statutory non-compliance was excused.  The court held that Shepard could not establish EMC made any false representations or concealed any material facts.

§ 1.3.6 Maine Business and Consumer Docket

H&B Realty, LLC v. JJ Cars, LLC[105] (Racial discrimination claim in commercial sublease claims).  This matter arose from a commercial lease dispute and involves a claim that the landlord racially discriminated against the tenant’s sublessees.  H&B Realty, LLC (H&B) was the owner of property in Portland, Maine, and Sterling Boyington (Boyington) was H&B’s sole member.  In May of 2011, H&B leased the property to JJ Cars, LLC (JJ Cars), with Mokarzel as its sole member.  From July 2011 to February 2013, Mokarzel operated his car dealership at the property.  During this period, Boyington would occasionally stop by to check on the property and to socialize.  During his visits, Boyington would make racist remarks about people of color to the Caucasian employees of JJ Cars.  By February 2013, Mokarzel was in financial duress, and decided to close his business and sublease the property.  JJ Cars sublet the property to several individuals for consecutive periods, and although Mokarzel did not provide H&B with the prerequisites necessary to obtain H&B’s consent to sublet the property, Boyington nevertheless consented or never objected.  On one instance, Boyington made racist comments and used expletives about people of color to one of the subleasing tenants.  Finally, by November 2015, JJ Cars attempted to sublease the property to a Caucasian individual, but Boyington refused to meet with the individual and approve a sublease.

The property sat unoccupied.  Mokarzel ceased paying rent, and Boyington took no steps to find a new tenant but simply decided that he no longer wanted H&B to lease the property.  In March 2016, a FED action was commenced and Boyington eventually obtained judgment.  H&B sold the property in April 2016.  H&B filed a Complaint seeking damages for unpaid rent for the period November 2015 through April 2016.  JJ Cars attempted to avoid paying damages on several grounds.  The court found that Boyington, pursuant to the Lease Agreement, “unreasonably withheld or delayed” his consent to the proposed sublease to the Caucasian individual, and that had he provided reasonable consent, JJ Cars would have been able to pay rent from November 2015 through April 2016.  Although in the commercial lease context a landlord has no duty to mitigate damages, the lease provisions here imposed such an obligation.  Additionally, the court concluded that because when JJ Cars began missing rent payments, Boyington took no steps to lease the property to someone else, he failed to mitigate damages.  The court granted judgment to JJ Cars and Mokarzel on Boyington’s complaint.

In their third party complaint against Boyington, JJ Cars and Mokarzel sought damages for public accommodation discrimination pursuant to the Maine Human Rights Act, 5 M.R.A. § 4592.  Their theory was that Boyington harbored racial animus, harassed and discriminated against JJ Cars’ subtenants, and caused those subtenants to vacate.  However, the court determined that the evidence did not support the theory, at least as to causation.  Boyington’s bigoted comments credibly established by the evidence occurred while JJ Cars was still in business, but there was no evidence that Boyington made similar comments “directed at” the subtenants of JJ Cars or caused them to vacate the property.  On the contrary, Boyington consented to subletting to subtenants who were persons of color, objecting only to the Caucasian subtenant.  The court concluded that JJ Cars and Mokarzel did not satisfy their burden of proving discrimination, and granted judgment to Boyington on the third party complaint.

Clavet v. Dean[106] (Fiduciary duty forms basis of failure to disclose claim against LLC member).  This Order for Entry of Judgment followed a 2019 bench trial, which centered around a September 2016 purchase by the defendants of the plaintiff’s membership interests in two entities they jointly owned: Blue Water, LLC and Covered Marina, LLC (hereinafter, the “Marinas”).  The parties had a long history of operating businesses in Maine and Texas, including real estate development, hotels, a storage facility, a car wash, two small insurance entities, and the utility Electricity Maine.  Both business partners and good friends, the parties owned the Marinas for over ten years on the gulf coast of Texas.  Finding the Marinas both unprofitable and difficult to insure, the parties sought to sell the Marinas.  In September 2016, a broker called Dean to discuss a purchase.  In reviewing the documented communications between the parties, the court found that Dean breached a number of legal duties he owed to Clavet.

Specifically, the court found that Dean intentionally omitted material information that he had a duty under Maine law to provide to the other member of Blue Water, Clavet.  The information consisted of the inquiries and communications from the broker to purchase the Marinas for a sum of 8 million dollars, which changed to 7.5 million dollars two days before Dean emailed Clavet to tell him that their wives needed to provide personal guarantees in order to have a line of credit.  The purchase and sale agreement between Dean and the broker was completed shortly thereafter, and Clavet, on that same day and completely in the dark about the agreement between Dean and the broker, signed over his membership interest in the Marinas to Dean.  Further, Clavet was not told about the sale of the Marinas until months later, when prior disclosure would have revealed to Clavet that Dean had timed and manipulated his buyout of the Marina interests from Clavet in order to keep the proceeds for himself—at the same time Dean made the contract to sell the Marinas for 7.5 million dollars, he was persuading Clavet to sell him his membership interests for a significantly lower price.

The court held that an omission by silence could constitute the supplying of false information as proof of intentional misrepresentation, but only in circumstances where there exists a special relationship such as a fiduciary relationship, which imposes an “affirmative duty to disclose.”  The information was intentionally withheld “for the purpose of inducing” Clavet to refrain from acting in reliance upon it.  The court further found that the omissions were material, “if for no other reason but that there is such a substantial difference between the sales price of 7.5 million dollars … and the purchase price of Clavet’s interest for 2.5 million dollars by Dean.”  The court entered judgment for plaintiff on the counts for fraudulent misrepresentation and breach of fiduciary duty.  The court also entered judgment for defendants on the counts for unjust enrichment and fraudulent transfer.

§ 1.3.7 Maryland’s Business and Technology Case Management Program

SACHS Capital Fund I LLC v. EM Group LLC[107] (Granting dismissal as to all but one of defendants’ claims).  SACHS Capital Fund I LLC, et al. v. EM Group LLC, et al., concerned a derivative action that was brought in an attempt to undue a $17 million loan that was made to EMSG, LLC, a Maryland limited liability company (EMSG), by TZG-Sachs Empire, LLC (TZG Sachs) to fund its expansion.  EMSG was formed by EM Group LLC, a Maryland limited liability company (EM Group), owning 67% of EMSG and the plaintiffs, Sachs Capital Fund I, LLC, Sachs Capital-Empire, LLC, and Sachs Capital-Empire B, LLC (collectively, the “Sachs Entities”), owning 33% of EMSG.  The lender, TZG-Sachs, agreed to amend the loan such that the maturity date was extended by three years from November 21, 2016 to November 21, 2019.  Beginning in April 2019, however, EMSG began to materially and repeatedly breach the payment terms of the amended promissory note.  The court, applying the Tooley test,[108] denied EM Group’s direct claims on the basis that they were largely derivative claims and that any recovery EM Group would receive would be based on its interest in EMSG, as EM Group and the other plaintiffs did not suffer injury that was distinct from the injury suffered by EMSG itself.

The court also considered EM Group’s claim that challenged the operating agreement that formed EMSG as an enforceable contract.  According to EM Group, the operating agreement favored the Sachs Entities to EM Group’s disadvantage.  The court, in applying Maryland contract law, concluded that EM Group was a sophisticated entity that should have readily understood the clear terms of the operating agreement.  The court, however, preserved EM Group’s declaratory judgment claim, which sought an interpretation of what proceeds could be distributed under the terms of the operating agreement.  EM Group also sought a declaration that the loan from TZG-Sachs was void and unenforceable because Sachs members of EM Group had failed to disclose that they (Sachs members) would reap a financial benefit in the event that EM Group defaulted on the loan.  The court, having found that the time for rescission had passed, dismissed this count.

Additionally, EM Group claimed that Mr. Sachs, the sole member of the managing member of the Sachs Entities, and TZG-Sachs fraudulently induced EM Group to enter into the EMSG operating agreements by: (1) making false representations regarding the treatment of EM Group under the terms of the agreements; (2) failing to disclose that the law firm that drafted the operating agreement held equity interests in the Sachs Entities; or (3) failing to disclose the interests of Mr. Sachs and TZG-Sachs in connection with the Sachs Entities and the loan being made to EMSG.  According to EM Group, it did not learn of these fraudulent statements and omissions until 2018 and 2019.  The court dismissed the claim finding that EM Group failed to plead fraud with the required requisite particularity.[109]  The court went on to note that Mr. Sachs’ failure to disclose that he had a 9.2% interest in TZG-Sachs and the law firm’s 1% interest in the Sachs Entities were not material conflicts of interest and therefore could not support a fraud claim.  The court also noted that EM Group’s claim was untimely as the President of EMSG had been on inquiry notice of the various interests as early as 2011, when it received letters describing both Mr. Sachs and TZG-Sachs interests and roles of the parties to the loan.

The court also dismissed EM Group’s civil conspiracy claim on the basis that EM Group had not met the clear and convincing standard for this claim.[110]  The court dismissed EM Group’s breach of fiduciary claim which alleged that Mr. Sachs owed EMSG and the investors a duty as a board member and financial advisor and that he violated this duty through a lack of disclosure of his investments that competed with EMSG.  The court concluded that there was no breach of any fiduciary duty, as the operating agreement expressly permitted the Sachs to invest in competing entities.  Finally, the court dismissed EM Group’s unjust enrichment claims on the basis that there was a valid contract between the parties.

United Cmty. Patrol Servs., Inc. v. Sepehri [111](Awarding a non-breaching party 49% ownership of stock in the breaching party).  In United Community Patrol Services, Inc., et al. v. Sepehri, the Circuit Court for Montgomery County ordered the defendants to transfer shares in United Community Patrol Services, Inc. (United) such that Plaintiff McClure, would own 49% in United.  In his complaint, Plaintiff McClure alleged that United had breached its contract to sell United stock to the plaintiff, a shareholder of United.  In February 2015, McClure, who had worked for United for over a year as a 1099 independent contractor, was terminated.  In April 2015, McClure paid $49 to Mr. Sepehri, a 49% owner of United, for the purchase of 49 shares of United.  McClure and Mr. and Mrs. Sepehri executed a Stock Purchase Agreement (the “Purchase Agreement”) which memorialized McClure’s purchase of the 49 shares of United.

Although his role as owner of United had not been discussed prior to the execution of the Purchase Agreement, McClure assumed that he would be responsible for bringing in business to the company.  Further, the extent of the discussion regarding compensation only involved an agreement between McClure and Mr. Sepehri that money would not be taken out of the business to compensate the parties.  From 2015 to 2018, McClure worked to secure business for United and became so involved with United that he had hired and managed its employees.  As of April 2018, however, McClure had not received a stock certificate or a transfer of Mr. or Mrs. Sepehri’s stock in United.  In fact, the Sepehris began excluding McClure on integral business decisions and terminating employees who had been hired by McClure.  McClure filed suit after his inspection of United’s accounting statements showed that Mrs. Sepehri had been paid $87,692.00 in wages in 2018 compared to the $18,500 issued to McClure in 1099 wages.

The court, in considering McClure’s breach of contract claims, held that the Purchase Agreement was valid, dismissing the defendants’ contention that the Purchase Agreement was an “agreement to agree.”  According to the court, the Purchase Agreement could not be interpreted as contemplating future negotiations, which is a critical feature of agreements to agree.  The court noted that this interpretation was also buttressed by the fact that the Sepehris accepted McClure’s $49 as payment for the shares of United stock.  The court determined that the plaintiff’s expert, who determined that United had a total gross income of $2,164,585.00 for the years 2015 to 2019, was not credible due to the expert’s failure to consider the entirety of the United’s financial records, including its debt.  Without the expert testimony, the court found that McClure had failed to prove his compensatory damages.  Rather, the court fashioned a remedy in which the Sepehris were ordered to issue stock in United such that McClure would become an owner of 49% of United’s issued and outstanding stock.

The court dismissed McClure’s derivative claims on the basis that McClure had not and would not become a stockholder until the Sepehris issued the stock pursuant to the court’s order.

Connaughton v. Day[112] (Denying plaintiffs’ motion for class certification).  In Connaughton, et al. v. Day, et al., the Circuit for Montgomery County denied the plaintiffs’ motion for class certification in a securities fraud lawsuit.  The plaintiffs alleged that the named defendants were principals of a “feeder fund” that procured investors for a Ponzi scheme run by non-party entities (the “MLJ Group”).  Plaintiffs alleged that the defendants solicited and sold investments in securities offered by the MLJ Group who would then use the proceeds to acquire debt portfolios.  Over the course of the litigation, the defendants grew in number from 4 to 18, a group that included the entities to which the original defendants allegedly funneled money and the counsel for one of the original named defendants.

Plaintiffs sought a class certification of “all persons who lent money to the MLJ Borrowers,” and excluded from the class, individuals who made a net profit on the participation in the Ponzi Scheme and those who were affiliates of the 18 defendants or the MLJ Group.  The court found that the plaintiffs did not meet three of the four threshold requirements for class certification under Maryland law.[113]  Specifically, the court found that plaintiffs neither demonstrated how joinder of the purported 35 class members would not be impracticable, nor did they demonstrate the typicality of the class.  With regard to typicality, the court found that purported class members received varying non-scripted emails and calls from defendants before the plaintiffs decided to complete the transactions.  Thus, different plaintiffs may have relied upon different misrepresentations from defendants, which negated any typicality amongst the class.  Finally, the court concluded that the class representatives could not adequately represent the class because of the difference in what the representations that were relied upon by the class representatives and other class members and because the class representatives could not represent the interests of another plaintiff who was also the target of potential claims of the other class members.

After finding that the plaintiffs had failed to meet the threshold requirements for class certification, the court considered plaintiffs’ claims under Maryland Rule 2-231(c)(3).  The court, having concluded that common law fraud claims are not susceptible to class action treatment because reliance can be unique to each class member, found that individual questions of fact predominated the putative class.

RCPR Acquisition Holdings, LLC v. Zurich Am. Ins. Co.[114] (Granting plaintiff’s motion to compel privileged documents).  In RCPR Acquisition Holdings, LLC v. Zurich American Insurance Company, the Circuit Court for Montgomery County granted plaintiff’s motion to compel the production of documents that defendant claimed were privileged communications between counsel and client.

The plaintiff, RCPR Acquisition Holdings, LLC (RCPR), is the owner of the Ritz Carlton San Juan hotel and casino in San Juan, Puerto Rico and the defendant is RCPR’s insurer.  Plaintiff filed a complaint against defendant on November 1, 2018, following the defendant’s alleged failure to satisfy its contractual obligations to indemnify plaintiff for property damage, business interruption and other losses sustained by RCPR as a result of Hurricane Maria under plaintiff’s insurance policy with defendant.  In connection with RCPR’s first set of requests for production of documents, the defendant withheld certain documents and provided a privilege log showing the nature of the documents and emails.  With respect to each document that was withheld, the defendant asserted that the document was protected by the attorney-client privilege because it was communications between counsel and client for purposes of providing legal advice.  In filing its motion to compel, the plaintiff asserted that defendant has failed to show that any privilege was applicable and that, even if the documents were privileged, the privilege was waived when the documents and emails were exchanged with an outside adjuster that was neither an employee of or counsel to the defendant.

The court determined that communications, which concerned insurance coverage, were not privileged as they were not exchanged for the purpose of seeking legal advice.[115]  The court found that, although the defendant’s outside counsel had been included on the emails, the emails demonstrated that counsel was included for the purpose of being involved in the insurance claim process and not for the purpose of providing legal advice.  In addition, the court noted that although the timing of the emails and the nature of the insurance claim at issue indicated that the communications with outside counsel were made at a time when the defendant could have anticipated litigation, the defendant had not provided any information to the court suggesting that that was in fact the case.  Ultimately, the court, finding that the communications were not privileged, ordered the defendant to produce the communications.

§ 1.3.8  Massachusetts Business Litigation Session

Attorney General v. Facebook, Inc.[116] (Attorney-client privilege and work product doctrine).  The Massachusetts Attorney General (AG) filed a petition to compel Facebook, Inc.’s compliance with a civil investigative demand (CID) issued in connection with the AG’s investigation into Facebook’s management of Facebook user data.  Beginning in late 2015, Facebook’s privacy policies came under increasing scrutiny after media outlets reported that a University of Cambridge professor, Aleksandr Kogan, managed to collect personally identifying information from the accounts of approximately 87 million Facebook users through a Facebook app that Professor Kogan had developed.  Professor Kogan then sold some of this data to a political data analytics and advertising firm, Cambridge Analytica, which used the data to send targeted campaign advertisements to Facebook users during the 2016 U.S. presidential election.  Facebook responded to these news reports by launching an internal App Developer Investigation (ADI) to audit Facebook apps for compliance with Facebook’s policies concerning the collection and use of user data.  Facebook retained a law firm, Gibson Dunn & Crutcher LLP, to design and direct the ADI.  In the ensuing months and years, Facebook issued periodic statements to update the public on the ADI’s progress.  In March 2018, the Massachusetts AG opened its own investigation into Facebook’s user data policies, issuing three CIDs that sought, among other things, information about the ADI and any apps that Facebook identified as problematic.  Facebook refused to produce documents generated in the course of the ADI, arguing that the material was protected by the work-product doctrine and attorney-client privilege.

The court first addressed Facebook’s claims of work product, emphasizing that the doctrine only protects material “prepared in anticipation of litigation or for trial.”  As the court concluded, the history of the ADI and Facebook’s own public statements showed that the ADI was not undertaken in anticipation of litigation; rather, the ADI was undertaken as part of Facebook’s normal business operations, being another iteration of its continuing efforts to ensure that app developers complied with Facebook’s policies concerning user data.  The court rejected Facebook’s argument that documents generated in the ADI were work product because the ADI was a “lawyer-driven effort.”  In the alternative, the court held that the AG had overcome the qualified protection of the work-product doctrine, concluding that the majority of the requested information was fact work product, and that the AG had demonstrated a substantial need for the information and an inability to obtain it from other sources.  Turning to Facebook’s claims of attorney-client privilege, the court similarly concluded that internal communications generated in the course of the ADI were not categorically privileged.  The attorney-client privilege, for example, did not extend to “any underlying facts or other information learned by Facebook during the ADI, including the identity of the specific apps, groups of apps, and app developers” that Facebook might have flagged.  Moreover, Facebook’s public statements about the ADI were inconsistent with its broad assertion of attorney-client privilege because “Facebook has touted the ADI as an investigation and enforcement program undertaken for the benefit of the Company’s users, and it has pledged to share information of suspected data misuse uncovered in the course of the ADI with its user community.”  The court recognized that some internal communications sought in one disputed CID request might contain privileged information, giving Facebook an opportunity to identify these documents in a privilege log.  Yet, the court held that the remaining five requests in dispute sought factual materials pertaining to an investigation that Facebook “touted . . . to the public in an effort to explain and defend its actions,” and therefore were not protected by attorney-client privilege.

Jinks v. Credico (USA) LLC[117] (Employee classification under state wage and overtime statutes).  The plaintiffs sued their former employer, DFW Consultants, Inc. (DFW), a marketing and sales company that provides door-to-door sales services.  In 2013 and 2015, respectively, DFW entered into a “Subcontractor Agreement” and a “Services Agreement” with Credico (USA) LLC (Credico), in which DFW agreed to provide sales services to Credico’s clients, and Credico agreed to compensate DFW for those services.  DFW hired the plaintiffs to do door-to-door marketing work for Credico’s clients.  The plaintiffs brought claims alleging that they were improperly classified as independent contractors and for violation of the Massachusetts minimum wage and overtime statutes.  In addition to their direct employer, DFW, the plaintiffs brought claims against Credico, alleging that DFW and Credico were “joint employers.”

The court disagreed, granting Credico’s motion for summary judgment on the ground that Credico was not a joint employer.  The court first rejected Credico’s argument that the minimum wage and overtime statutes only contemplate that an employee has a single employer.  Although the statutes use the singular term “employer,” the court concluded, based on appellate precedent and the remedial purpose of the statutes, that the statutes should be construed to encompass claims against joint employers.  The court then addressed what test determines whether a defendant is an “employer” under the Massachusetts statutes.  Under the common law “right to control” test, a company could be deemed a joint employer if it has “sufficient control over the work of the employees of another company.”  The plaintiffs argued that the “ABC Test,” outlined in a Massachusetts statute defining “independent contractor,” had supplanted the common law “right to control” test.  But the court rejected this argument, holding that the independent contractor statute “applies only where a worker provides services directly to a potential employer.”  Because the plaintiffs never provided services to Credico directly, the “right to control” test still determined whether Credico could be deemed a “joint employer.”  Applying the “right to control” test, Credico could not be deemed a joint employer because the undisputed evidence showed that Credico had no power to hire or fire the plaintiffs; no authority over their work schedules or compensation; and did not maintain employment records for them.

The minimum wage and overtime claims against DFW turned on whether the plaintiffs fell within certain statutory exemptions for workers engaged in “outside sales.”  To be exempt under the minimum wage statute, a worker engaged in “outside sales” cannot make daily reports or visits to the employer.  The court denied the summary judgment motions of DFW and its manager, Jason Ward, because there was a genuine dispute of material fact as to whether the plaintiffs did so.  The court held, however, that the outside sales exception to the overtime statute applies regardless of whether an employee makes daily reports.  As such, it granted summary judgment for DFW and Ward on the overtime claims.  The court also granted summary judgment for certain plaintiffs on their misclassification claims, concluding that the undisputed facts showed that they were improperly classified as independent contractors.

CommCan, Inc. v. Baker[118] (Equal Protection challenges to Governor’s executive order).  On March 10, 2020, the Governor of Massachusetts, Charlie Baker, declared a state of emergency in Massachusetts due to the spread of the COVID-19 virus.  The Governor subsequently ordered all businesses in Massachusetts to close their brick-and-mortar workplaces and facilities unless they provided certain “COVID-19 Essential Services.”  The orders included liquor stores and licensed medical marijuana treatment centers in the lists of essential businesses allowed to remain open.  The orders did not include nonmedical adult-use marijuana retailers as essential businesses, requiring such stores to close.  The plaintiffs—nonmedical marijuana retailers, marijuana cultivators that sell to nonmedical retailers, and an individual that uses marijuana medically but lives over an hour away from the nearest medical marijuana treatment center—brought a constitutional challenge to the Governor’s orders, arguing that they violated the equal protection provisions of the Fourteenth Amendment of the U.S. Constitution and Articles 1 and 10 of the Massachusetts Declaration of Rights.  The plaintiffs sought a preliminary injunction barring enforcement of the Governor’s closure orders against them.

The court denied the plaintiffs’ request for a preliminary injunction, concluding they ultimately would not succeed on the merits of their claims.  To begin, the court emphasized the broad powers of the State to restrain liberty and the use of private property to protect the public health.  At the same time, the court rejected the Governor’s argument that the court lacked subject matter jurisdiction over the case because the Massachusetts declaratory judgment statute does not allow for declaratory relief against the Governor.  Even if declaratory relief were not available by statute, an executive order of the Governor “may be challenged on the grounds that it is unconstitutional or otherwise unlawful.”  “The fact that the challenged orders were issued under the Governor’s broad emergency powers does not mean that they are immune from judicial review.”  Turning to the merits, the court held that because the “right to pursue one’s business” is not a “fundamental right,” the constitutional question turned on whether there was a “rational basis” for the Governor’s orders to draw a distinction between, on the one hand, medical marijuana treatment centers and liquor stores, and, on the other hand, nonmedical marijuana retailers.  The Governor put forth two justifications for not exempting nonmedical marijuana retailers from the COVID-19 closure orders.  First, nonmedical marijuana retailers tend to attract large crowds of customers because there are so few of these businesses licensed in the Commonwealth.  Second, nonmedical marijuana retailers tend to attract out-of-state customers.  The plaintiffs “convincingly” argued that both concerns could be addressed by less burdensome alternative measures.  This argument failed, however, because equal protection does not require the State to employ less burdensome alternatives.  Moreover, the Governor was not required to cite or rely upon these justifications when he actually issued the orders.  Accordingly, because the Governor’s orders requiring nonmedical marijuana retailers to close were not “arbitrary or capricious,” they passed constitutional muster.

§ 1.3.9 Michigan Business Courts

Farm Bureau Gen. Ins. Co. of Mich. v. ACE Am. Ins. Co.[119] (Insurance dispute).  On remand from the Michigan Supreme Court, the Kent County Business Court addressed whether Farm Bureau could rescind its policy that was procured through fraud when an innocent third party is involved under the framework in Bazzi v. Sentinel Ins. Co., 502 Mich. 390, 919 N.W.2d 20 (2018).  Relying on Bazzi, the court found that plaintiff was not entitled to rescission.

In this case, the injured claimant, the wife of the named insured, attempted to claim no-fault benefits through her husband’s policy with plaintiff.[120]  On May 22, 2013, the wife was injured as an intoxicated pedestrian when a vehicle failed to yield.  However, on his insurance application to plaintiff, the insured husband had omitted his wife as a named insured under the policy—only indicating that he was married.[121]  Without further inquiry into the wife’s identification and driving history, plaintiff issued the policy on February 25, 2013.  However, due to the omissions on the husband’s application, plaintiff issued a notice of policy cancellation on April 22, 2013, effective May 25, 2013.  The subject accident occurred two days before the cancellation date.

Plaintiff filed suit to rescind the insurance policy based on fraudulent inducement after discovering the wife’s history of drunk driving, leading to a license suspension.  In finding that plaintiff was not entitled to rescission, the court noted that while insurers may rescind insurance contracts based on fraud, the court must balance the equities to determine which innocent party should assume the loss.  There the court conducted a two-day evidentiary hearing.  The court found, among other things: (1) plaintiff should have immediately investigated the glaring omissions on the application; (2) despite intoxication, the wife had the right-of-way and was not at fault for the accident; (3) and plaintiff waited six months after the policy cancellation date to refund the premiums.  Thus, plaintiff was not entitled to rescission.

Happy Little Tree Co., LLC v. Prof’l Prop. Dev., LLC[122] (Breach of commercial lease).  This case addresses the budding uncertainty in Michigan regarding the application of contract principles to commercial lease disputes in the medical marijuana industry.  In Happy Little Tree, the court found in favor of plaintiff, a licensed medical marijuana growing facility, on its breach of commercial lease agreement and related claims.

Plaintiff and defendant entered into a commercial lease for plaintiff to operate a medical marijuana growing facility.  The subject property was in total disrepair.  As such, the lease term would not commence until and unless defendant made specific repairs within forty-five days of the lease execution date.  When defendant failed to timely repair the premises, plaintiff offered to purchase the property and continue operations independently.  Defendant refused.  Subsequently, defendant discovered that there was a current city ordinance halting the opening of new medical marijuana facilities.  Defendant informed plaintiff of this and provided an ultimatum: plaintiff could either terminate the lease or continue paying rent.  Plaintiff declined both offers and retained access to the property until defendant changed the locks and leased it to a new tenant.

Plaintiff filed suit for breach of commercial lease, unjust enrichment, and violations of the Michigan Anti-Lockout Law.  The court held that defendant breached the lease by failing to complete the repairs within the required time frames.  Further, the court rejected defendant’s argument that it could not have breached the lease because the purpose of the lease was banned by city ordinance.  The court reasoned that the ban was lifted in enough time for plaintiff to fulfill the lease purpose, had defendant timely completed the repairs.  The court also noted that the lease provided that the premises could be utilized for any other agreed use.  Finally, the court held that defendant violated Mich. Comp. L. § 600.2918, Michigan’s Anti-Lockout Law, because defendant interfered with plaintiff’s possessory interest in the property.

Liberty Plus, LLC v. Vill. Crest Condo. Ass’n[123] (Breach of contract, unjust enrichment, and constructive trust).  In this case, a delay in discovery proceedings due to the COVID-19 pandemic precluded summary disposition under Mich. Ct. R. 2.116(C)(10) (the state counterpart to Fed. R. Civ. Pro. 56).  At issue was the validity of an affidavit submitted by Village Crest in opposition to Liberty’s motion for summary disposition.  The affidavit was not notarized due to COVID-19 restrictions.  With a seamless balance of fairness and public safety, the court observed that “while the [a]ffidavit … is not notarized” Liberty initiated suit on February 12, 2020, one month before the “pandemic effectively shut down the country,” causing significant delays in the litigation process.  As such, the court held that “in light of the need for [additional] discovery,” summary disposition was not appropriate.

Corktown Hotel, LLC v. Caspian Constr. Grp., Inc.[124] (Negligence and commercial construction dispute).  This business dispute involved whether defendant Caspian Construction Group (Caspian), the substitute general contractor, could be held liable to plaintiff hotel, in contract or tort, for non-code installation of shower handles that defendant did not design or select.  Plaintiff hired ROK Construction Services, LLC (ROK) to perform construction management services in connection with its plan to renovate an old Holiday Inn.  Plaintiff also contracted with an interior designer to design a two-handle shower valve.  Plaintiff approved the design and authorized the replacement of the valves, which were installed by ROK on half the floors before Caspian replaced ROK.  Subsequently, plaintiff hired Caspian to complete the renovation.  The contract between plaintiff and Caspian specifically called for the remaining showers to be equipped with the two-valve design.  Additionally, permits and plans were specifically excluded from the scope of the contract.  Upon completion of the renovation, the valve design was found to violate city code, and plaintiff did not receive its necessary permit.

Plaintiff filed suit for breach of contract and negligence based on the non-code installation of the shower valves.  In granting summary disposition on both counts for Caspian under Mich. Ct. R. 2.116(C)(10), the court held, “[d]efendant owed no professional duty of care (tort) to Corktown independent of the contract” unless plaintiff demonstrated a duty “separate and distinct from the contractual obligation.”  Thus, because the shower handles were included in the contract, plaintiff was barred from recovery.

§ 1.3.10 New Hampshire Commercial Dispute Docket

Control Techs. v. ENE Systems of New England[125] (Nondisclosure agreements).  This case stems from a dispute between two commercial entities, both of whom are building management solution providers that design, install, and maintain commercial heating and ventilation systems.  Defendant hired co-defendant from plaintiff.  According to plaintiff, prior to leaving for defendant, co-defendant accessed numerous confidential client files and sent the confidential information to defendant in violation of a nondisclosure agreement.  In ruling in favor of the plaintiff during a preliminary injunction hearing, the court found that, although the noncompetition agreement between plaintiff and co-defendant was overbroad, the nondisclosure provisions of the agreement were still enforceable.  According to the court, “when a noncompetition agreement is overbroad on its face, the court need not consider whether it could be narrowed where the relief requested is enforcement of misappropriation of confidential information.”

Here, the nondisclosure provision was enforceable because (1) plaintiff had a significant and legitimate interest in preventing employees from appropriating its goodwill to its detriment, (2) the provisions did not impose an undue hardship upon the co-defendant, and (3) the nondisclosure agreement was not injurious to the public interest.  Finally, the court held injunctive relief was appropriate because irreparable injury can occur if appropriation of trade secrets such as confidential information is not enjoined, and it is difficult to quantify the impact of lost sales and diminished customer relationships.

High Liner Foods (USA), Inc. v. Groves[126] (Noncompetition agreements, RSA 275:70, modification of restrictive covenant by court, trade secrets, preliminary injunctions).  This case arose out of a former employer’s effort to enforce restrictive covenants and confidentiality obligations in an employment agreement.  The novel issue presented was whether the employee’s agreement occurred before or after the restrictive covenants were reflected in a formal written agreement.  New Hampshire has a statute that prohibits an employer from enforcing a noncompete agreement unless it was provided to the prospective employee prior to the acceptance of an offer of employment.  The statute does not affect other provisions of such an agreement, including confidentiality, nondisclosure of trade secrets, intellectual property assignment, or other similar provisions.

Here, the prospective employee met with a representative of the employer, and reached an understanding regarding the basic terms of the proposed employment, reflected in notes on a napkin.  The so-called “Napkin Memo” did not include any description of the noncompete agreement, but this was reflected in the formal offer of employment that came from authorized representatives of the employer, and was ultimately executed by the employee.  The business court determined, on these facts in the context of a request for preliminary injunctive relief, that Napkin Memo was not the offer of employment, and that accordingly, the restrictive covenants in the formal written agreement would be enforceable.  The decision also applied customary standards to the request for injunctive relief, as well as the law regarding enforceability of restrictive covenants, including redlining to cure overbroad provisions.

Legacy Global Sports, LP v. St. Pierre[127] (Choice of law, breach of contract, wrongful termination, aiding and abetting breach of fiduciary duty, tortious interference with contractual relations, fraudulent inducement to contract, indemnification of corporate officers, intervention).  This matter has resulted in a number of decisions from the business court respecting several theories of liability in a commercial dispute context.  This decision deals with several of them.

The New Hampshire Supreme Court has never addressed the theory of aiding and abetting a breach of fiduciary duty, but a federal appellate opinion predicted that New Hampshire would do so if and when the issue was presented.  The business court agreed with this prediction, adopting the formulation in Restatement (Second) of Torts § 876(b): (1) a breach of fiduciary obligations; (2) knowing inducement or participation in the breach by the one aiding and abetting; and (3) damages as a result of the breach.  The court went on, however, to find that the complaint did not adequately allege facts to support each of these elements, and dismissed the claim.  The dismissal of this claim, as well as one for conspiracy, was also based on the principle that a corporation cannot conspire with its agents, as now reflected in numerous decisions, although again, not as yet addressed directly by the New Hampshire Supreme Court.

The court also dismissed a claim of breach of the implied covenant of good faith and fair dealing.  Noting that a “party who pleads a breach of an express term of a contract can hardly assert a breach of contract based upon the same term, alleging that it is implied.”  For this reason, this claim was also dismissed.  Finally, the court declined to dismiss a fraudulent inducement claim, addressing an argument that a party seeking rescission based upon a fraudulent concealment must tender any benefits received under the contract.  In contrast, a tort claim for damages when there has been a fraudulent concealment does not seek rescission, and accordingly, the tender rule does not apply.

Legacy Global Sports, LP v. St. Pierre[128] (Electronic discovery).  This same matter produced a decision focused solely on discovery subpoenas issued for emails, both to parties and non-parties.  There were also subpoenas directed toward Google for these same parties and non-parties, and the court dealt with motions to quash them, basically on over-breadth, and therefore abusive, grounds.

The subpoenas to Google requested so-called “header information,” i.e., from and to, date, and subject matter for a specified email address, as well as information about the owner of the account associated with the address.  The subpoenas further sought information regarding any deleted emails during a relevant timeframe.

While recognizing that the request was “akin to a privilege log,” the court found that these requests were classic examples of fishing expeditions, and quashed them.  Likewise, without an adequate basis to identify potentially relevant communications, and the need for them in the circumstances, the subpoenas to the parties and non-parties were also quashed.

Boudreau v. Wax Specialists, LLC[129] (Restrictive covenant not to compete).  In this case, defendant required plaintiff (an esthetician) to sign three separate non-competition agreements while she worked for defendant.  In determining that the non-competition agreements were unreasonable, the court applied a three-part test and found in favor of plaintiff regarding each factor.

First, the non-competition agreement was not reasonably limited in geographic scope and was not advanced for a legitimate business purpose.  Estheticians do not have assigned territories and are not traditionally positions subject to non-competition agreements.  The fact defendant paid for plaintiff’s training also did not justify the non-competition agreement because defendant required the training as part of the job and plaintiff signed an agreement indicating she would repay the cost of training if she left employment early.  Second, the court found an undue burden on plaintiff.  Enforcement of the non-competition agreement had already cost plaintiff one job, and there was a real risk that enforcement would jeopardize plaintiff’s ability to provide for her children as the sole financial support for her family.  Finally, the court held the work of an esthetician is personal in nature, and the public has an interest in enabling customers of the service provided by plaintiff and defendant to see the provider of their choice.

§ 1.3.11 New Jersey’s Complex Business Litigation Program

Hana Trading Corp. v. Cardinale[130] (Defendants’ distinct entities, no breach of fiduciary duty).  New Jersey Bergen County Superior Court Complex Business Litigation Judge Robert C. Wilson ruled in favor of defendants’ summary judgement motion finding the defendants were separate legal entities and they did not breach their fiduciary duty owed to the plaintiff.  Plaintiff Hana Trading Corp. (Hana), a business involved in exporting scrap materials from the United States to Asia, agreed to purchase batteries from Jutalia Recycling (Jutalia).  Hana traveled to Jutalia’s New Jersey yard twice, and on both occasions, failed to observe the batteries being loaded into containers.  Hana only relied upon the fraudulent invoices, packing slips, and sale orders issued by Jutalia and its agent.  Hana hired Defendants World Logistics USA, LLC (World LLC) and Olympiad Line, LLC (Olympiad) to assist in the shipment of Hana’s purchased scrap batteries to export to South Korea.

In its discussion, the Superior Court first determined that Defendants World Inc., World LLC, and Olympiad were not one entity as Hana alleged in its amended complaint.  The court reasoned that they were set up as separate corporate structures for separate business purposes.  The court next analyzed whether the defendants breached their fiduciary duty to Hana.  The court concluded that Hana did not ensure it was receiving the correct amount of batteries when it purchased the order from Jutalia even though it traveled to Jutalia’s New Jersey property and confirmed the numbers were accurate.  Defendant Olympiad had no way of knowing the information it received from Hana was false, did not have prior access to the containers, and did not receive tickets that would show a weight discrepancy; and therefore, did not commit a breach of fiduciary duty to Hana.

L’Oreal USA, Inc. v. Wormser Corp.[131] (Plaintiff cannot ignore its own forum selection clause).  Complex Business Litigation Judge Wilson ruled that the New Jersey Superior Court did not have subject matter jurisdiction when the parties were governed by a forum selection clause selecting a foreign jurisdiction, even when the Court had jurisdiction over a place of business for the plaintiff and the defendant’s principal place of business.  L’Oreal (plaintiff) filed suit against Wormser and Process Technologies and Packaging LLC (defendants) in the District Court of New Jersey, subsequently withdrew that suit due to lack of federal diversity jurisdiction, and then filed suit in Bergen County, New Jersey.  Further, plaintiff ultimately filed an amended complaint, which contended that Bergen County was the appropriate venue because it was defendant Wormser’s principal place of business.  The relationship between all parties was governed by an agreement that was not negotiated between the parties, but rather contained plaintiff’s unilaterally dictated terms.

Moreover, the agreement contained a forum selection clause and choice-of-law provision that stated, “any dispute shall be brought before the Courts of the city where [plaintiff]’s registered address is located and the laws of the state of such registered address shall apply.”  The plaintiff claimed that “registered address” referred to a New Jersey office; however, the court found that the plain and ordinary meaning of “registered address” is the address of plaintiff’s USA headquarters, which was used by the plaintiff when it was required to register an address with the United States Trademark Office and the Federal Trade Commission.  The court held that because the plaintiff drafted the forum selection clause, the plaintiff cannot in turn claim fraud, undue influence, or a violation of public policy and a forum selection clause will govern even when an alternative forum contains a place of business for the plaintiff and the principal place of business for the defendant.

§ 1.3.12 New York Supreme Court Commercial Division

Lazar v. Attena, LLC[132] (Petition for dissolution of LLCs).  In Lazar, Justice Andrea Masley of the New York County Commercial Division granted Arik Mor and Uriel Zichron’s (together, “Respondents”) motion to dismiss a petition to dissolve three limited liability companies, Attena LLC, Hemera LLC, and Nessa LLC (collectively, the “LLCs”).  The court’s opinion addressed whether the LLCs should be dissolved on the ground that they were no longer functioning in accordance with their stated purpose, which was defined broadly to include “any lawful business purpose.”

Gabriel Lazar and Joel Scheinbaum (Petitioners), who were members of the LLCs, initiated a special proceeding under New York Limited Liability Company Law § 702 to dissolve the LLCs.  Section 702 permits judicial dissolution of an LLC, upon application of one of its members, “whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.”  In order to show entitlement to such a dissolution, the member seeking such relief “must establish, in the context of the terms of the operating agreement or articles of incorporation, that (1) the management of the entity is unable or unwilling to reasonably permit or promote the stated purpose of the entity to be realized or achieved, or (2) continuing the entity is financially unfeasible.”[133]

Petitioners alleged that: (1) the sole purpose of the LLCs was to acquire, own, and operate five separate multi-family properties located in Manhattan; (2) such properties were acquired between 2012 and 2013; and (3) all of these properties were sold in 2015.  Accordingly, petitioners alleged, the LLCs had run their course and could no longer be operated consistent with their purpose.

The court began its analysis by rejecting petitioners’ allegation regarding the purpose of the LLCs.  The court stated that, “[n]owhere in the operating agreements does it state, as [p]etitioners allege, that the ‘sole purpose of the LLCs was to acquire, own and operate five separate multifamily properties located in Manhattan.’” Rather, the court explained, the stated purpose of the LLCs according to their operating agreements was “any lawful business purpose.” And, the court noted, petitioners had not claimed that “[r]espondents have failed to promote or permit [that] stated purpose.” Thus, the court held that petitioners had not satisfied the failed-purpose test of Section 702.  In so holding, the court distinguished two cases cited by petitioners, Matter of Fassa Corp. and Matter of 47th Rd. LLC.[134]  The court distinguished Fassa Corp., in part, because the operating agreement in that case specifically provided that the company’s purpose was to acquire real property and resell the property.  And the court found that 47th Rd. was distinguishable because there was clear evidence in that case that the broad stated purpose of the company was no longer being fulfilled.  The court then cited Yu v. Guard Hill Estates, LLC[135] as an example of another case where the Commercial Division dismissed a dissolution petition on the basis of a broad purpose provision.  In Yu, the operating agreement provided that “the purpose of the companies was to acquire certain real property and engage in any other lawful act or activity for which limited liability companies may be formed under [New York law] and engaging in any and all activities necessary or incidental to the foregoing.”  The court next held that petitioners failed to satisfy the financial-failure test of Section 702, noting that there was “no evidence that the LLCs are in financial turmoil, insolvent or otherwise cannot meet their debts and obligations.”  Finally, the Commercial Division held that petitioners’ allegations regarding Respondents’ “oppressive conduct,” even if true, did not justify dissolution.

Setter Capital, Inc. v. Chateauvert[136] (Personal jurisdiction as a factor in obtaining preliminary injunction).  In Setter, Justice Andrea Masley of the Commercial Division ruled that the issue of whether a court has personal jurisdiction over a defendant is relevant to determining whether to grant a motion for a preliminary injunction.  In Setter, plaintiff Setter Capital, Inc. (Setter), a financial services firm, moved pursuant to CPLR § 6301 for a preliminary injunction against defendant Maria Chateauvert, Setter’s former employee.  The motion sought to restrain her from soliciting or recruiting Setter’s customers or otherwise interfering with its business relationships.  Chateauvert’s job had involved calling potential clients to identify buyers and sellers of securities.  A resident of Canada, Chateauvert had previously signed an agreement with Setter which contained confidentiality and non-compete clauses.  The agreement also contained a choice-of-law clause providing it was governed by the laws of New York, and a forum-selection clause in which the parties agreed to submit to the jurisdiction of the Division.  Under New York law, a plaintiff moving for a preliminary injunction bears the burden of establishing: (1) a likelihood of success on the merits; (2) the danger of irreparable injury in the absence of preliminary injunctive relief; and (3) that the balance of equities favors the plaintiff.  However, as the Commercial Division explained, whether the court has jurisdiction over the defendant is a “threshold issue” that is relevant to determining the plaintiff’s likelihood of success on the merits.

Here, it was unclear whether the Commercial Division could exercise jurisdiction over Chateauvert pursuant to the agreement, because under N.Y. Gen. Oblig. Law §§ 5-1401 and 5‑1402,[137] choice-of-law and forum-selection provisions in contracts for labor or personal services are not enforceable against non-residents, and Chateauvert’s agreement with Setter specified that it was a “personal service” agreement.  Additionally, the Commercial Division questioned whether Chateauvert, who was only two years out of college when she signed the agreement, “was the sophisticated business person the legislature envisioned in 1985 when GOL §5-1401 and §5-1402 were enacted.”  Setter therefore bore the burden of establishing jurisdiction over Chateauvert without reference to the agreement.  Justice Masley ruled that “this was an issue of fact that undermines plaintiff’s likelihood of success.”  The Commercial Division concluded that Setter had otherwise failed to show likely success on the merits, given that there was no showing of protected trade secrets and Setter’s rating system was available online.  The court also ruled that Setter had not shown irreparable harm, and that the balance of equities favored Chateauvert.  Accordingly, the Commercial Division denied Setter’s motion for a preliminary injunction.  Setter illustrates that on a preliminary injunction motion, the issue of whether the court has jurisdiction over the defendant may be a threshold issue of fact that must be satisfied in determining the plaintiff’s likelihood of success on the merits.

South Coll. St., LLC v. Ares Capital Corp.[138] (Corporate veil piercing in New York Debtor and Creditor Law claims).  In South College Street, Justice Schechter of the New York State Supreme Court, Commercial Division, dismissed petitioner’s New York Debtor and Creditor Law claims, which were premised on alter ego liability.  The opinion addressed the types of allegations a plaintiff must make in order to successfully plead a veil-piercing claim.  The case involved South College Street, LLC, a company that purchased a property in North Carolina that was subject to a lease for Charlotte School of Law (CSL).  The lease was guaranteed by CSL’s parent company, InfiLaw Corporation (InfiLaw).  In October 2017, CSL stopped paying its rent, so plaintiff commenced a North Carolina action against CSL and InfiLaw to enforce the lease.  In that action, plaintiff obtained a judgment against CSL and InfiLaw, jointly and severally, for $24.55 million.  Plaintiff then commenced a New York lawsuit against Ares Capital Corporation (Ares), a creditor of InfiLaw and a company to which InfiLaw’s parent company, InfiLaw Holding, LLC (InfiLaw Holding), had conveyed certain payments.  Specifically, plaintiff asserted New York Debtor and Creditor Law (DCL) claims, arguing that “between June 2015 and August 2016, more than $32 million was fraudulently conveyed to Ares” and seeking to “enforce its judgment against [InfiLaw] by setting aside those conveyances.”  Ares moved to dismiss plaintiff’s complaint.

In considering Ares’s motion to dismiss, the court noted that although DCL claims can generally only be asserted by creditors of the transferor, DCL liability can extend to alter egos.  “Alter ego liability requires piercing the corporate veil, which is an exception to the presumption that corporate entities are distinct from their owners[.]”  As Justice Schechter explained, “[w]hether veil piercing is warranted, is governed by the law of the state of incorporation of the entities whose veils were sought to be pierced[.]”  Because InfiLaw and InfiLaw Holding are both incorporated in Delaware, the Court applied Delaware law.  Under Delaware law, “to state a veil-piercing claim, the plaintiff must plead facts supporting an inference that the corporation, through its alter-ego, has created a sham entity designed to defraud investors and creditors[.]”  The court remarked that it is “difficult” to meet this standard because a plaintiff must allege facts showing a parent company’s domination over its subsidiary, as well as facts demonstrating that the corporate structure itself was used to perpetuate a fraud.

Justice Schechter concluded that plaintiff had not adequately alleged facts supporting a reasonable inference that the corporate structure of and InfiLaw and InfiLaw Holding was designed to defraud InfiLaw’s creditors.  Specifically, the court found that “[w]hile plaintiff alleges that [Infilaw Holding] dominates and controls [Infilaw], that is not enough.”  Instead, the court reasoned, “plaintiff must plead, for instance, that the capital structure of [InfiLaw Holding] and [InfiLaw] was specially designed to ensure [InfiLaw]’s creditors would be left seeking to collect from an empty shell.”  The court further noted that “the fraud prong of a veil piercing claim must rely on something other than merits of the underlying claim on which alter ego liability is sought[.]”  Thus, the court concluded that plaintiff’s allegations supporting its DCL claims—that CSL was destined to fail because of InfiLaw’s underlying debt structure—were insufficient to plead alter ego liability.  Accordingly, the court granted Ares’s motion to dismiss.

Matlick v. AmTrust Fin. Servs., Inc.[139] (Failure to disclose delisting of securities).  In Matlick, et al. v. AmTrust Financial Services, Inc., Commercial Division Justice Andrew Borrok found that an issuer cannot be held liable under the Securities and Exchange Act of 1933 for the failure to disclose the risk that certain securities could be delisted when the issuer never guaranteed the listing of such securities in the first instance.

In January 2019, AmTrust announced that it would delist and deregister certain securities that it had issued between 2013 and 2016, effective the following month.  As a result of this announcement, the stock price of the securities fell by approximately 35%.  Each offering of the relevant securities was registered through a number of offering documents that included representations, including that the securities were listed with the SEC, and AmTrust would list the securities on the New York Stock Exchange.  Plaintiffs sued AmTrust for delisting the securities asserting claims for violations of Sections 11 and 12(a)(2) of the Securities and Exchange Act, based on AmTrust’s alleged material misstatements in and omissions from the offering documents, as well as claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and promissory and equitable estoppel.

Justice Borrok focused on the language of the offering agreements in ruling for AmTrust.  As the Court explained, “the gravamen of the Plaintiffs’ Complaint is that AmTrust failed to disclose in its Offering Documents that delisting the Securities was a possibility.”  However, courts evaluate whether statements are false or misleading at the time they were made—“not retroactively, in hindsight.”  The court held that plaintiffs had failed to allege any actionable misstatement or omission as required to state their Securities and Exchange Act claims because AmTrust was under no obligation to disclose publicly available information and its “ability to delist is publicly set forth by statute, in regulation, and in the NYSE rules.”  The Commercial Division went on to explain that “all the Complaint alleges is that AmTrust should have disclosed the fact that the company could delist at some point in the future,” and this “is, indeed, too speculative (and, indeed, too obvious) to have required disclosure.”  Justice Borrok also dismissed the contract claims, concluding that there was no contractual promise to list the securities or to keep them listed forever.  Other claims were dismissed on technical grounds.  Under the Commercial Division’s ruling in Matlick, the onus is on purchasers of securities to familiarize themselves with publicly available information, which need not be disclosed in the offering documents.

§ 1.3.13 North Carolina Business Court

Reynolds Am., Inc. v. Third Motion Equities Master Fund, Ltd.[140] (Appraisal rights).  In this appraisal action, dissenting former shareholders of Reynolds American, Inc. (Reynolds), the holding company that owned R.J. Reynolds Tobacco Company, asserted that they did not receive fair market value for their shares in connection with the purchase of Reynolds by British American Tobacco (BAT).  Dissenters argued that despite a general decline in the tobacco industry, Reynolds had enjoyed strong revenues and earnings growth leading up to the transaction, which was not reflected in the offer price.  They claimed that BAT’s 42 percent ownership in Reynolds tainted the transaction and that Reynolds should have pursued negotiations with other potential buyers.

Ultimately, the court found the dissenters’ valuation of the shares “unreasonable both as a matter of common sense fact-finding and under North Carolina law,” concluding that the fair market value of the shares was what they had been paid.  Recognizing the lack of North Carolina appellate authority on the court’s appraisal process, the court turned to Delaware law to determine the fair value, “a price that is one that a reasonable seller, under all of the circumstances, would regard as within a range of fair value; one that such a seller could reasonably accept[.]”  The court determined that in this instance, the deal price was a fair price because Reynolds stock traded in an efficient market, the deal was an arm’s-length transaction, there was sufficient publicly available information about the company, and there were no conflicts of interest among members of the board and transaction committee.  Notably, the evidence showed that Reynolds had managed to negotiate four price increases from BAT during the course of the transaction.

The court rejected the dissenters’ theory that Reynolds should have solicited other bidders and pressed BAT to encourage other bids, concluding that there were few if any alternative bidders in the heavily consolidated tobacco market, none of which had expressed any interest in purchasing Reynolds.  Additionally, despite their expert’s testimony, the dissenters also failed to provide evidence of any negative effect on the deal price stemming from BAT’s large ownership interest in Reynolds.  Finally, the court rejected the dissenters’ claims that the Reynolds management and financial advisors conspired to sell the company at a depressed price.  In conclusion, the court determined the “imperfect, but nonetheless robust, deal process” resulted in a fair deal price of $59.64 per share.

Aldridge v. Metro. Life Ins. Co.[141] (Effect of bankruptcy settlement on defendants’ motion to dismiss).  This case arose out of an alleged Ponzi scheme operated by Charlotte businessman Richard C. Siskey prior to his suicide in 2016, after the FBI publicly revealed that they were pursuing fraud charges against him.  Plaintiffs were investors who claimed that MetLife was on notice of the “routinely questionable transactions” that Siskey engaged in, but it did nothing to stop Siskey once it learned of his fraudulent behavior.  Rather, plaintiffs asserted that MetLife actively worked to conceal Siskey’s actions.  Plaintiffs also claimed that several individual defendants at MetLife had aided Siskey in inducing them to invest in the scheme.

In January 2017, an involuntary bankruptcy proceeding was initiated against one of Siskey’s entities involved in the alleged scheme.  Several of Siskey’s other entities plaintiffs had invested in entered bankruptcy as well.  Plaintiffs filed proof of claim forms, and in late 2018, the Bankruptcy Trustee entered into a settlement agreement releasing all claims against MetLife in exchange for MetLife’s contribution to a bankruptcy settlement fund.  Thus, in considering defendants’ motion to dismiss for lack of standing, the Business Court was required to construe the scope of the “first-crack” doctrine.  This doctrine relies on the premise that only the Bankruptcy Trustee has standing to pursue claims that belong to the bankruptcy estate unless and until the trustee abandons those claims.  Therefore, defendants argued that plaintiffs lacked standing to bring individualized claims.

The Business Court determined that the first-crack doctrine would not be applicable to all of plaintiffs’ claims.  Under North Carolina law, plaintiffs would have standing if they could show (1) an individualized injury separate from damages to the bankrupt entities; or (2) a special duty owed to them by defendants.  The court found that plaintiffs had individualized injuries with respect to the individual defendants, as they would never have invested but for being enticed by the individual defendants.  However, the court granted the motions seeking dismissal of plaintiffs’ fraud, constructive fraud, and negligent misrepresentation claims brought directly against MetLife.  In those cases, plaintiffs failed to show any individualized harm because they failed to show any misrepresentation made by MetLife.  Likewise, plaintiffs failed to plead any special duty owed to them by MetLife that would give them individual standing.  The court further found that plaintiffs’ claims against MetLife for its negligent supervision of Siskey failed to show individualized harm and dismissed them.  Nevertheless, the court concluded that plaintiffs’ claims were allowed to go forward to the extent they sought to hold MetLife liable for the actions of Siskey and the individual defendants on a theory of vicarious liability.  Finally, the court determined that certain plaintiffs who failed to allege their policies were involved in the Ponzi scheme had failed to allege a particularized injury with respect to their unfair trade practices claims, and thus lacked standing to pursue those claims.

Klos Constr., Inc. v. Premier Homes & Props., LLC[142] (Fiduciary duties in the context of an LLC operating agreement).  On these cross motions for summary judgment, the court had to determine whether and to what extent the parties owed each other fiduciary duties.  In late 2008, plaintiff formed Premier Homes and Properties, LLC with defendants Key Marco Consulting and Marketing, Inc. and Alpat Properties, LLC for the purposes of constructing homes in a real estate development near Wilmington, North Carolina.  The operating agreement disclaimed liability for managers to the company or other members for any of the following: (1) conflicts of interest; (2) any transaction from which a manager derived an improper personal benefit; or (3) any acts or omissions occurring prior to the date the agreement became effective.  Furthermore, the agreement stated that upon any amendment to the North Carolina Limited Liability Act, liability for managers would be limited to the fullest extent possible under the amended Act.  Premier Homes and Properties then entered into an agreement whereby T. Ando Construction and Consulting, Inc. and its owner, licensed real estate broker Terrance Ando, would be its “sales manager” and “broker-in-charge” for the newly constructed homes.

Construction began in 2009.  However, in 2015, Key Marco’s sole shareholder, Robert Weinbach, formed another entity, Premier Homes and Communities, LLC, with Ando also for the purpose of building homes in the same residential community.  Plaintiff brought suit alleging that Weinbach, Key Marco, and Ando had, among other things, breached their fiduciary duties owed to Premier Homes and Properties.  Construing the agreement, the court found that Weinbach was not a party to the operating agreement, but instead was merely a designee who signed on behalf of Key Marco.  As a result, the court denied plaintiff’s motion for summary judgment and granted Weinbach’s motion with respect to plaintiff’s claims for breach of fiduciary duty, constructive fraud, and breach of the implied covenant of good faith and fair dealing.  Additionally, the court determined that the plain language of the operating agreement clearly gave the parties the right to establish competing businesses.  The court also noted that in 2014, the North Carolina Limited Liability Act was amended to allow managers to waive their duty of loyalty.  Thus, the court granted Key Marco’s motion for summary judgment on plaintiff’s breach of fiduciary duty and constructive fraud claims because the operating agreement no longer required any duty of loyalty among the managers.  However, the court denied Key Marco’s motion with respect to the breach of the duty of good faith claim, explaining that unlike the duty of loyalty, contractual obligations of good faith cannot be waived in an operating agreement.  Finally, the court determined that Ando and T. Ando Construction did owe fiduciary duties to Premier Homes and Properties by virtue of their agreement to be its real estate broker, thus denying their motions for summary judgment on plaintiff’s fiduciary duty and constructive fraud claims.

Rickenbaugh v. Power Home Solar, LLC[143] (Class action arbitration).  James and Mary Rickenbaugh brought suit on behalf of a class of plaintiffs alleging they were fraudulently induced to purchase defendant’s solar panels based on promises of energy savings that never materialized.  The parties’ contract contained a broad arbitration provision stating that “any dispute arising out of . . . any aspect of the agreement” would be settled according to the AAA Construction Industry Rules.  The court was called on to determine (1) whether the FAA or the North Carolina Uniform Arbitration Act applied; (2) whether the parties agreed that arbitrability was a matter for the court or the arbitrator to decide; and (3) whether the availability of class arbitration was an issue for the court or the arbitrator to determine.

First, the court determined that despite language in the arbitration clause stating that North and South Carolina law would apply, the FAA preempted the parties’ choice of law provision because plaintiffs’ claims were based on an alleged fraudulent scheme occurring in five states, thus evidencing a transaction involving interstate commerce.  Secondly, the court determined that based on the broad language of the arbitration clause and the inclusion of the AAA Rules, under North Carolina precedent, there was “clear and unmistakable evidence” showing that the parties agreed the arbitrator would determine issues of substantive arbitrability.  Finally and most importantly, the court determined that the parties had “clearly and unmistakenly agreed” that the availability of class arbitration was also a decision for the arbitrator.  The court recognized the federal circuit split on the issue but determined that the inclusion of the AAA Construction Rules provision showed that the parties had agreed that the arbitrator would decide the scope of the arbitration proceedings, including whether class arbitration was available.  Defendants have currently appealed the ruling on the class certification issue to the North Carolina Supreme Court.

Vanguard Pai Lung, LLC v. Moody[144] (Advancement of litigation expenses for an LLC manager).  Defendant William Moody served as president and CEO of plaintiff for nearly a decade.  Plaintiff alleged Moody engaged in wide-ranging misconduct detrimental to plaintiff, including the siphoning of money and assets from plaintiff.  Plaintiff sued Moody, three members of his family, and two entities he owns.  Plaintiff’s lawsuit alleged sixteen causes of action, including fraud, embezzlement, breach of fiduciary duty, and breach of contract.  Moody was fired prior to the institution of the lawsuit, but remained a manager of plaintiff.

Moody contended that plaintiff must advance his expenses incurred in legal defense of the lawsuit pursuant to the terms of plaintiff’s operating agreement, including attorneys’ fees.  Moody asserted a counterclaim demanding the advancement of those expenses, and moved for judgment on the pleadings on his advancement counterclaim.  The operating agreement provided a broad, mandatory right to advancement if two conditions were met: (1) the manager must have been sued “by reason of the fact” that he was an authorized representative of plaintiff; and (2) that the manager must repay the advancement if ultimately determined not to be entitled to indemnification.  The parties contested whether the first condition was met.  Citing supportive Delaware law, the court found the phrase “by reason of the fact” only requires a “nexus” between the underlying claim and the official’s corporate capacity.  The court concluded that all claims against Moody “arise ‘by reason of the fact’ that he was a manager and officer of [plaintiff].”  Therefore, the court determined that Moody was entitled to the advancement of his litigation expenses in defending the lawsuit.  Further, the court allowed advancement related to Moody’s counterclaims for advancement and indemnification, but did not allow advancement related to Moody’s counterclaims that did not directly respond to the allegations against him.  The court rejected plaintiff’s arguments that Moody forfeited his right to advancement based on its affirmative defenses against Moody’s counterclaims, including that Moody allegedly materially breached the parties’ contract.  The court also rejected plaintiff’s arguments that determination of the advancement claim was improper for a motion for judgment on the pleadings.  The court advised future litigants to bring an advancement dispute to the court’s attention in the case management report to allow early motions practice and limited discovery if necessary on the issue.

§ 1.3.14 Philadelphia Commerce Case Management Program

Chhaya Mgmt., LLC v. Cigar Wala, LLC[145] (Cannot pierce corporate veil against uninvolved owners who did not benefit from fraud).  Chhaya Management won a $660,000 judgment against Cigar Wala, but could not pierce the corporate veil against two principals named as defendants, Shah and Patel.  The Commerce Court found that a third principal, Desai, solely caused Cigar Wala’s breach by diverting its funds to himself, leaving Cigar Wala unable to make payments due to Chhaya Management.  Plaintiff did not name Desai as a defendant.  There was no evidence, however, linking Shah and Patel to Desai’s fraudulent conduct, “or to any conduct giving rise to a piercing of a corporate veil as to them.”

The court first held Chhaya’s claims were for breach of contract, and dismissed its tort claims for conversion and conspiracy under the gist of the action doctrine.  As to piercing the corporate veil, courts will pierce the corporate veil against equity owners who control the business and misuse it to their personal benefit.  The court found Shah and Patel did not control Cigar Wala at the time Desai pilfered its funds for his own use.  Even though the court earlier determined Shah and Patel should have been the controlling (75%) owners of Cigar Wala, Desai had frozen them out.  Thus, at the time of the breach, Shah and Patel neither had the ability to control Cigar Wala, nor did they gain any benefit from Desai’s fraud.  Rather, Desai’s fraud harmed Shah and Patel as well.  The decision was affirmed on appeal in relevant part.

Humphrey v. GlaxoSmithKline PLC[146] (Non-signatories not bound by arbitration agreement).  In Humphrey, the Commerce Court addressed the issue of whether non-signatories to an arbitration agreement could be bound by the agreement.  Plaintiffs were two individuals and a corporation, ChinaWhys Company, Ltd.  Another company they owned, ChinaWhys (Shanghai) Consulting Co. Ltd., entered a consulting agreement with a foreign subsidiary of GlaxoSmithKline PLC (GSK PLC) to carry out an investigation.  That agreement included an arbitration clause.  Plaintiffs allege they were imprisoned and otherwise subjected to considerable suffering in connection with the investigation, and sought relief in the Commerce Court against GSK PLC and another subsidiary, GlaxoSmithKline, LLC (GSK LLC).  Plaintiffs did not name GSK PLC’s foreign subsidiary as a defendant, nor was ChinaWhys (Shanghai) named as a plaintiff.  One of the individual plaintiffs, however, signed on ChinaWhys (Shanghai)’s behalf.  The defendants moved to compel arbitration of the entire matter under the consulting agreement.

Supervising Commerce Court Judge Gary S. Glazer observed that the usual presumption favoring enforcement of arbitration clauses does not apply to non-signatories.  In those circumstances, “the parties opposing arbitration … are given the benefit of all reasonable doubts and inferences that may arise.”  Here, four of the five parties did not sign the agreement at issue, and the individual plaintiff only signed on the corporation’s behalf and not in his individual capacity.  Judge Glazer found the facts alleged in the complaint “completely extrinsic” to the consulting agreement embodying the arbitration clause.  Plaintiffs did not seek relief under the contract, but brought tort claims against non-parties to that contract, to which plaintiffs were also not parties.  Although the individual plaintiffs were principals of ChinaWays (Shanghai), their individual claims were unrelated to the ChinaWays (Shanghai)’s consulting agreement.  The court rejected defendants’ arguments that there was an “obvious and close nexus” between plaintiffs, their claims, and the consulting agreement.  Judge Glazer likewise rejected defendants’ agency, estoppel, alter ego and contract assumption theories.

Am. Entrance Servs., Inc. v. ACME Mkts., Inc.[147] (Abuse of process and wrongful use of civil proceedings distinguished).  In American Entrance Services, the Commerce Court found no abuse of process, and described the difference between “abuse of process” and “wrongful use of civil proceedings” under Pennsylvania law.  ACME had joined American as a third party defendant in numerous personal injury suits concerning maintenance of automatic doors.  The factual gravamen of American’s abuse of process claim was the allegation that American repeatedly forewarned ACME there was no factual basis for these joinders, because ACME itself failed to maintain and upgrade the doors contrary to American’s advice.  Judge Ramy I. Djerassi found these allegations did not make out an abuse of process case.

The court defined common law abuse of process “as the use of legal process against another primarily to accomplish a purpose for which it is not designed.”  There must be “some definite act or threat not authorized by the process, or aimed at an objective not legitimate in the use of the process….”  “[T]here is no liability where the defendant has done nothing more than carry out the process to its authorized conclusion, even if done with bad intentions, though not necessarily the case here.”  At best, American was attempting to state a claim for wrongful use of civil process in initiating meritless claims.  Abuse of process claims, however, are not based on improperly initiating a case, but “on a perversion of the legal process after it is initiated.”  Thus, American’s allegations of improperly filing meritless joinder claims did not fall within the abuse of process penumbra.

§ 1.3.15 Rhode Island Superior Court Business Calendar

Richmond Motor Sales, Inc. v. Nationwide Mut. Ins. Co.[148] (Insurer cannot be sued directly).  A rental company rented motor vehicles to various customers.  The customers provided their own motor vehicle insurance information to the company as proof of insurance.  The vehicles were returned with damage, and the rental company sued the insurance carriers directly for the damage.  The court held that R.I. Gen. Laws Sections 27-7-3 and 27-7-6 did not give the rental company the right to pursue the carriers.

Cashman Equip. Corp., Inc. v. Cardi Corp.[149] (Motion to strike jury demand).  Before the court was plaintiff Cashman Equipment Corporation, Inc.’s (Cashman) motion to strike defendants RT Group, Inc. (RTG), James Russell, and Steven Otten’s jury demand.  At issue was whether the action must be tried without a jury.

Here, the applicable statute provides that:

any person, firm, or corporation which is awarded a contract subsequent to July 1, 1977, with the state of Rhode Island, acting through any of its departments, commissions, or other agencies, for the design, construction, repair, or alteration of any state highway, bridge, or public works other than those contracts which are covered by the public works arbitration act may, in the event of any disputed claims under the contract, bring an action against the state of Rhode Island in the superior court for Providence county for the purpose of having the claims determined

and that “[t]he action shall be tried to the court without a jury.”  G.L. 1956 § 37-13.1-1(a).

The court found there was no question that Cashman’s amended complaint, and this entire case, arose out of disputes related to the contract between RIDOT and Cardi.  Section 37-13.1-1 clearly states that disputes arising out of a contract with the State involving the “design, construction, repair, or alteration of any state . . . bridge” must be tried “without a jury.”  This statute must be strictly construed, and it does not provide any exception for cases in which the State is a third-party defendant or is not the subject of direct claims by the original plaintiff to the case.  Instead, the statute has been strictly construed to apply to and protect the State’s sovereign immunity in cases when the State is a third-party defendant in cases involving disputes between subcontractors and general contractors such as the dispute here.  Therefore, the motion to strike jury demand was granted, and the case must be tried without a jury.

Premier Land v. Kishfy[150] (Party breached contract through non-payment and change in scope of work).  Defendant Kishfy entered into a construction contract with the plaintiff pursuant to which the defendant agreed to perform certain renovations as set forth in a scope of work and subject to certain cost allowances.  Defendant agreed to pay for such renovations in monthly installments.  Defendant ended up substantially modifying the scope of work, which led to increased costs and delays.  He subsequently stopped making payments on the grounds that the project was taking too long to complete.  The court found that the defendant had materially breached the contract through his nonpayment and his increases to the scope of work.

Sadler v. 30 Route 6, LLC[151] (Real estate purchaser granted right to specific performance).  The court granted a real estate purchaser specific performance against his vendor.  Although the purchaser missed the stated closing date, there was no “time of the essence” clause in the contract.  Further, the purchaser worked in good faith to prepare for the closing.  The vendor could not use the purchaser’s failure to obtain financing as an excuse, because the financing contingency was solely for the benefit of the purchaser.  Finally, the vendor’s notice that it did not intend to close constituted an anticipatory breach that excused the purchaser but did not terminate the contract.

Atsalis Bros. Painting Co. v. Aetna Bridge Co.[152] (Subcontractor permitted to correct technical defect in making good faith claim).  Aetna entered into a $39 million Contract Agreement (Prime Contract) with Rhode Island Turnpike and Bridge Authority (RITBA) to perform certain rehabilitation work on the Claiborne Pell Bridge (Project).  The Agreement between Aetna and RITBA incorporated into it inter alia the Rhode Island Department of Transportation, Division of Public Works standard specifications for road and bridge construction (the Blue Book) and other supplemental materials.  Aetna entered into a $26 million contract (Subcontract) with Atsalis Brothers Painting Co. (Atsalis) as subcontractor to perform approximately two-thirds of the work on the project called for by Prime Contract.  The subcontract contained a provision that made the Prime Contract documents between Aetna and RITBA, including the Blue Book, a part of the Subcontract.  The Blue Book required that a subcontractor certify that its claims for payment were made in good faith.  The plaintiff made a claim, but failed to include that certification.  The court held that this was a formal defect that “can easily be rectified” and gave the plaintiff leave to amend its certificate if it could in fact assert its claim in good faith.  The subcontractor also claimed that the contractor defrauded the subcontractor when it said it would settle up at the end of the contract.  Analogizing from Massachusetts common law and Rhode Island law on false pretenses, the court denied the contractor’s motion to dismiss a fraud claim, because a promise to do something in the future can still constitute fraud if the party never intended to act.

§ 1.3.16 Tennessee Business Court

Falcon Pictures Group v. HarperCollins Christian Publ’g, Inc.[153] (Motion for summary judgment and judgment on the pleadings).  This case involves a dispute between two businesses in the entertainment industry.  The plaintiff and the defendant entered into a business relationship in 2006.  The plaintiff was to produce, and the defendant was to market and sell, a product known as the New Testament Audio Bible.  The parties entered an agreement for the defendant to advance funds to plaintiff and to pay royalties according to the terms of the contract.  Additionally, the parties entered into separate contracts for an Old Testament Audio Bible and a Kids Audio New Testament.  Eventually, plaintiff began to question whether defendant was properly calculating and paying royalties.

The court found that the defendant was entitled to dismissal of the claim for breach of the duty of good faith and fair dealing under Rule 12.  That cause of action is not an independent cause of action in Tennessee, but must be brought in conjunction with and as part of a breach of contract claim.  The court dismissed that cause of action on that basis.  The court denied all the other relief requested by the defendant pursuant to Rule 12 or 56 because the plaintiff was able to demonstrate sufficient factual disputes to prevent judgment or was entitled to develop the facts for the court’s consideration.

Romohr v. The Tenn. Credit Union[154] (Motion to dismiss).  Romohr v. The Tennessee Credit Union involves a dispute between plaintiff, individually and on behalf of all others similarly situated, and the Tennessee Credit Union (TCU).  The complaint alleges that Romohr is a member of the TCU and has a checking account governed by TCU’s Membership Account Agreement.  The central issue of the lawsuit centers around insufficient funds penalties and the pertinent language of the membership account agreement.  Romohr alleges that TCU charged three separate insufficient funds penalties against his account following attempted charges by a third-party vendor.  Romohr brings this suit for breach of contract and unjust enrichment.

The court noted a multitude of pending litigation involving this subject matter and further noted that each case pivots on the specific language within each agreement, specifically, whether or not certain terms contained therein are sufficiently defined.  Because the agreement in question contains some ambiguities, this case survived a Rule 12.02(6) motion to dismiss.

Family Trust Servs., LLC v. Green Wise Homes, LLC[155] (Civil conspiracy, fraud, and defamation of title).  This case with a lengthy history involves an alleged civil conspiracy related to fraudulently created documents to misappropriate and undercut the Tennessee redemption process following delinquent tax sales in Middle Tennessee.  The plaintiffs alleged that the defendants engaged in a systematic conspiracy by creating and recording false deeds in various counties to undermine the redemption process and profit at the expense of purchasers for value at tax sales.  Plaintiffs brought causes of action for civil conspiracy, defamation of title, fraud, trespass, and unfair competition, and sought to certify a class action for similarly situated victims.

This case has, thus far, involved removal and remand to bankruptcy court and criminal contempt charges against a defendant.  Recently, the court considered a motion to dismiss and motion for class certification.  Ultimately, the court dismissed plaintiffs’ claim for conversion of the intangible right of redemption and denied class certification.  Litigation will continue.

§ 1.3.17 West Virginia Business Court Division

Highmark W. Va., Inc. v. MedTest Labs., LLC[156] (Personal jurisdiction over third-party defendants).  This case was referred to the Business Court Division on June 18, 2019, and arises from a contractual dispute between a West Virginia-based insurance carrier, Highmark West Virginia, and a West Virginia-based medical test provider, MedTest Laboratories.  Initially, Highmark filed this suit alleging that MedTest was carrying out a fraudulent billing scheme.  However, it is the counterclaim and third party action instituted by MedTest that prompted the order being discussed.  Highmark is part of the national Blue Cross Blue Shield insurance network.  MedTest has a contract with Highmark to provide laboratory testing services to anyone in the national Blue Cross Blue Shield network in exchange for payment from Highmark, allowing Blue Cross Blue Shield’s insureds to receive coverage for healthcare regardless of where they were in the country.  MedTest’s counterclaim and third party action centered on Highmark’s failure to pay MedTest for services performed as required by contract.  In response, the third party defendants filed a motion to dismiss, alleging that West Virginia lacked personal jurisdiction over the third party defendants.

The Business Court Division disagreed and found that West Virginia had personal jurisdiction over the foreign third party defendants.  First, the court found that West Virginia’s long-arm statutes were met.  The court reasoned that the contracts involved meant that MedTest would provide a service, Highmark would process and pay the claim, and then the third party defendants would reimburse Highmark.  Further, each of the third party defendants was required to participate in the program.  This was enough to satisfy West Virginia’s long-arm statutes.  Second, constitutional due process was satisfied when all of the third party defendants listed MedTest as an available provider in their provider directory.  Because the third party defendants advertised—even just through an online post of provider directories—to their insureds that they could use MedTest and be covered by their plan that they had purposefully availed themselves of the forum and were thus subject to personal jurisdiction.  The court handed down the order denying the motion to dismiss on March 27, 2020.

The third party defendants filed a petition for writ in prohibition with the Supreme Court of Appeals of West Virginia, seeking review of the finding by the Business Court that there was personal jurisdiction over all of the out of state Blue Cross plans.  The Supreme Court of Appeals issued a rule to show cause and has the case under submission for decision.

Am. Bituminous Power Partners, LP v. Horizon Ventures of W. Va., Inc.[157] (Commercial lease dispute).  Two orders come from this case, which arose from a decades-long dispute over the terms of a lease between American Bituminous, the operator of a power plant, and Horizon Ventures, the landlord, which was only referred to the Business Court Division on January 10, 2019.  The lease required American Bituminous to use locally mined coal to produce electricity, and foreign fuel could only be used for non-operational purposes.  Monthly rent is a percentage of the power plant’s gross revenue, varying based on the type of fuel on site.  If locally-sourced fuel is used, rent is 3% of gross revenue; if foreign fuel is used, rent is only 1% of gross revenue.  However, subsequent to the lease, the parties agreed that if any Local Fuel remained on the premises—whether useable or not—the rent would be 2.5% of gross revenue.  Eventually, American Bituminous stopped using Local Fuel, but did not ask Horizon Ventures to reduce its rent.  The action before the Business Court Division involved a dispute over the percent of gross revenue paid as rent and whether American Bituminous’s use of Foreign Fuel was within the discretion provided by the lease contract.

The court entered two separate orders granting summary judgment on these issues.  First, the court granted summary judgment to Horizon Ventures regarding American Bituminous’s claim that the percent of gross revenues paid as rent was too high.  Looking at the length of the dispute between the parties, and the origin of the contracts, the court reasoned that the doctrines of waiver and laches apply.  American Bituminous had known since 1989 that its rent could be reduced based on the usage of foreign fuel, and knew it had stopped using Local Fuel for operating purposes; American Bituminous’s failure to act was an indication it had waived the contractual right and had otherwise waited too long to assert the claim.  Second, the court granted American Bituminous summary judgment with regards to the assertion that American Bituminous had been arbitrary and capricious in its decision to use Foreign Fuel.  The court looked at American Bituminous’s decision-making process, including factors such as cost, safety, and longevity of the power plant, and determined that American Bituminous had considered all relevant factors such that its conduct was not arbitrary and capricious as defined by law.  As a result, the court granted American Bituminous summary judgment on the final issue before the court and the matter was dismissed.

§ 1.3.18 Wisconsin Commercial Docket Pilot Project

Mattheis v. Ihnen[158] (Judicial estoppel and sham affidavit rule).  In Mattheis, the court was asked to interpret both the doctrine of judicial estoppel and the sham affidavit rule as it relates to statements made by a party in previous court cases.  The defendant Ihnen moved for summary judgment on all Mattheis’s claims, each of which suggested that Mattheis had alleged ownership interest in various entities.  As the court outlined in its decision, Mattheis had previously testified via interrogatories, deposition, and affidavits in both a divorce proceeding and a federal case for fair wage violations that he had sold his ownership interest in both companies.

Using the doctrine of judicial estoppel, the court cited State v. Ryan[159] and found that the three elements for judicial estoppel were satisfied: (1) the later position must be clearly inconsistent with the earlier position; (2) the facts at issue should be the same in both cases; and (3) the party to be estopped must have convinced the first court to adopt its position.  The court found that all these elements were met even though the earlier position was taken in other cases and that to meet the third element, the previous court need not explicitly find that the position at issue was adopted.  Instead, following Seventh Circuit precedent, the court found that it was enough that the party prevail using the inconsistent statement.  For Mattheis, the court was persuaded that Mattheis was able to leverage the positions taken in his divorce proceeding and federal case to sidestep a determination of the disputed issue of his ownership interests and prevailed.  As such, the court granted summary judgment to Inhen based on judicial estoppel and dismissed all claims.

Similarly, the court applied the sham affidavit rule as another basis to grant summary judgment.  Just as with the judicial estoppel argument, the court held that statements in Mattheis’s affidavit were directly contrary to his statements in the divorce proceedings and in his state and federal income tax returns, which stated that he sold his business shares.  Following a recent decision from the United States District Court for the Eastern District of Wisconsin,[160] the court found that the earlier statement (in this case, the divorce proceeding and tax returns) must stand unless the party can adequately explain why the recent statement was necessary.  Here, the court was unconvinced that Mattheis provided any legitimate explanation as to the recent statements and struck his affidavit pursuant to the sham affidavit rule, again granting summary judgment to Inhen.

[1] For a more detailed discussion on what may be defined as a business court, see generally A.B.A. Bus. Law Section, The Business Courts Bench Book: Procedures and Best Practices in Business and Commercial Cases (Vanessa R. Tiradentes, et al., eds., 2019) [hereinafter Business Courts Bench Book]; Mitchell L. Bach & Lee Applebaum, A History of the Creation and Jurisdiction of Business Courts in the Last Decade, 60 Bus. Law. 147 (2004) [hereinafter Business Courts History].

[2] For an overview of business courts in the United States, see, e.g., Business Courts Bench Book, supra note 1, Business Courts History, supra note 1, Lee Applebaum & Mitchell L. Bach, Business Courts in the United States: 20 Years of Innovation, in The Improvement of the Administration of Justice (Peter M. Koelling ed., 8th ed. 2016); Joseph R. Slights, III & Elizabeth A. Powers, Delaware Courts Continue to Excel in Business Litigation with the Success of the Complex Commercial Litigation Division of the Superior Court, 70 Bus. Law. 1059 (Fall 2015); John Coyle, Business Courts and Inter-State Competition, 53 Wm. & Mary L. Rev. 1915 (2012); The Honorable Ben F. Tennille, Lee Applebaum, & Anne Tucker Nees, Getting to Yes in Specialized Courts: The Unique Role of ADR in Business Court Cases, 11 Pepp. Disp. Resol. L. J. 35 (2010); Ann Tucker Nees, Making a Case for Business Courts: A Survey of and Proposed Framework to Evaluate Business Courts, 24 Ga. St. U. L. Rev. 477 (2007); Tim Dibble & Geoff Gallas, Best Practices in U.S. Business Courts, 19 Court Manager, no. 2, 2004, at 25. Further, the Business Courts chapter of this publication has provided details on developments in business courts every year since 2004. Finally, the Business Courts Blog went online in 2019, and serves as a library for past, present and future business court developments, (last visited Oct. 26, 2020).

[3] Chancery Court, Wyoming Judicial Branch, (last visited Oct. 27, 2020).

[4] Business Courts Bench Book, supra note 1, at xx.

[5] Business Courts History, supra note 1, at 207, 211.

[6] American College of Business Court Judges, (last visited Oct. 25, 2020).

[7] See Meeting Agenda, Law & Econ. Ctr, (last visited Nov. 14, 2020).

[8] 75 Bus. Law. 2053 (2020).

[9] ABA Ad Hoc Comm. On Business Courts, Business Courts: Towards a More Efficient Judiciary, 52 Bus. Law. 947 (1997); Business Courts History, supra note 1.

[10] 75 Bus. Law. 2077 (2020).

[11] Establishing Business Courts in Your State, (ABA login required) (last visited Oct. 26, 2020).

[12] These materials are located on the Business Court Subcommittee’s Library web page, (ABA login required) (last visited Oct. 26, 2020).

[13] A.B.A. Section of Business Law Judges Initiative Committee, (ABA login required) (last visited Oct. 26, 2020).

[14] Business Court Representatives, ABA: Bus. Law Section, (ABA login required) (last visited on Oct. 26, 2020).

[15] Diversity Clerkship Program, ABA: Bus. Law Section, (ABA login required) (last visited on Oct. 27, 2020).

[16] Business and Commercial Courts Training Curriculum, Nat’l Ctr. for State Courts, (last visited Oct. 26, 2020).

[17] Faculty Guide, Business and Commercial Litigation Courts Course Curriculum, Nat’l Ctr. for State Courts, (last visited Oct. 26, 2020).

[18] New business court docket curriculum developed for courts nationwide, Nat’l Ctr. for State Courts, (last visited Oct. 26, 2020) [hereinafter Business Courts Curriculum].


[20] See, e.g., Business Court Studies and Reports 2000–2009, Bus. Courts Blog (Jan. 5, 2019),; Business Court Studies and Reports 2010–2018, Bus. Courts Blog (Jan. 5, 2019),; New York Commercial Division Advisory Council Report on Business Court Benefits, Bus. Courts Blog (July 10, 2019),

[21] See, e.g., Douglas L. Toering & Ian M. Williamson, Business Courts in Michigan – Seven Years and Counting, 99 Mich. Bar J. 20 (Jan. 2020),; Hon. Brian Stern & Christopher J. Fragomeni, An Introduction to the Business Calendar, The Business Recovery Program, and Virtual Hearings, 68 RI Bar Jnl. 3 (May 2020),; Pamela K. Bookman, The Adjudication Business, 45 Yale J. Int’l Law 227 (Summer 2020); William J. Moon, Delaware’s New Competition, 114 Nw u. L. Rev. 227 (2020); Gerhard Wagner & Arvid Antz, Commercial Courts in Germany, 79 Ius Gentium 3 (2020); 2019 Annual Report, West Virginia business Court Division,  (last visited Oct. 26, 2020).

[22] See, e.g., Delaware Corporate & Commercial Litigation Blog, (last visited Oct. 26, 2020); Mass Law Blog, (last visited Oct. 26, 2020); New York Business Divorce Blog, (last visited Oct. 26, 2020); NY Commercial Division Blog, (last visited Nov. 13, 2020); New York Commercial Division Practice, (last visited Oct. 26, 2020); Duane Morris Delaware Business Law Blog, (last visited Oct. 26, 2020); Commercial Division Blog: Current Developments in the Commercial Division of the New York State Courts, (last visited Oct. 26, 2020); The North Carolina Business Litigation Report, (last visited Oct. 26, 2020); The Nevada Business Court Report, (last visited Oct. 26, 2020); It’s Just Business (North Carolina), (last visited Oct. 26, 2020); The  Westchester Commercial Division Blog, (last visited Oct. 26, 2020); and the New  York Commercial Division Roundup, (last visited Oct. 26, 2020).

[23] Commercial Court Review Committee Report to the Ariz. Judicial Council, p. 4, (2018),

[24] Ariz. R. Civ. P. 8.1(b); (c).

[25] Ariz. R. Civ. P. 8.1(d)(6).

[26] DTR1C-SGW, LLC v. Ulta Salon Cosmetics & Fragrance Inc., No. CV 2019-052749, 2020 WL 4586231 (Ariz. Super. July 20, 2020).

[27] Mountainside Fitness Acquisitions LLC, v. Ducey, No. CV 2020-093916, 2020 WL 4586233 (Ariz. Super. Aug. 5, 2020).

[28] Ninth Judicial Circuit of Florida, News, Business Court to Reopen on October 21, 2019 (Oct. 25, 2019),

[29] Amended Administrative Order Governing Business Court (Oct. 25, 2020),

[30] Id.

[31] Ninth Judicial Circuit of Florida, About the Court, Judges, Circuit Judges, Judge John E. Jordan (Oct. 25, 2020),

[32] Eleventh Judicial Circuit of Florida, About the Court, Civil Court, Complex Business Litigation (Jan. 8, 2021),

[33] Seventeenth Judicial Circuit of Florida, Circuit Civil (Oct. 25, 2020),

[34] Thirteenth Judicial Circuit of Florida, Judicial Director, Judge Darren D. Farfante (Jan. 8, 2021),

[35] Commercial Court Document Search, (last visited Oct. 24, 2020).

[36] Indiana Commercial Courts Handbook, (last visited Oct. 24, 2020).

[37] Commercial Courts Committee, /iocs/2944.htm (last visited Jan. 11, 2021).

[38] Iowa Judicial Branch,

[39] Id.

[40] Kathy A. Bolton, Notebook: Could ‘high-profile’ foreclosure case move to an Iowa specialty court? Business Record,

[41] Supra note 37.

[42] Id.

[43] Id.

[44] For more information see

[45] Mich. Admin. Ord. Administrative Order No. 2020-6.

[46] Id.

[47] John Nevin, Michigan’s Justice System Reaches 1 Million Hours of Zoom Hearings, (Sept. 17, 2020), This article is not an endorsement or critique of Zoom or any other video conferencing program.

[48] For those interested in learning more about the use of Zoom in Michigan business courts, see Douglas Toering & Ryan Hansen, Touring the Business Courts, Mich. Bus. L. J., Summer 2020 at 11, (last visited Oct 30, 2020).

[49] State Court Administrative Office, Michigan Trial Courts Virtual Courtroom Standards and Guidelines (Revised August 5, 2020),

[50] Mich. Comp. L. § 600.8033(3).

[51] Justice Robert Reed Appointed to New York County Commercial Division, NY Commercial Division Blog, (Oct. 7, 2020),

[52] Administrative Order of the Chief Administrative Judge of the Courts, AO/134/20 (Sept. 23, 2020),

[53] Administrative Order of the Chief Administrative Judge of the Courts, AO/133/20 (Sept. 29, 2020),

[54] See Residential Mortgage Foreclosure Diversion Program,

[55] In re: Commerce Court Temporary Financial Monitor Program, Order No. 42 of 2020, Court of Common Pleas of Philadelphia County (Pa. 1st Jud. Dist., June 22, 2020),

[56] R.I. Superior Court Administrative Order No. 2020-04, COVID-19 Business Recovery Plan (Mar. 31, 2020),

[57] R.I. Superior Court Order (Apr. 21, 2020),

[58] New Business Court Docket Curriculum Developed for Courts Nationwide, National Center for State Courts (Oct. 26, 2020),

[59] See Business Courts Curriculum, supra note 18.

[60] See The 2019 Annual Report of the West Virginia Business Court Division,

[61] In re creation of a pilot project for dedicated trial court judicial dockets for large claim bus. & com. cases, 2017 WI 33,

[62] Id.

[63] This district covers circuit courts in a number of northeastern Wisconsin counties including Door, Kewaunee, Brown, Marinette, Oconto, Waupaca, and Outagamie.

[64] PowerPoint Presentation, Thomas Schappa, Dist. Court Adm’r, Com. Ct. Docket Pilot Program (Oct. 2020) (on file with author).

[65] In re creation of a pilot project for dedicated trial court judicial dockets for large claim bus. & com. cases, 2017 WI 33,

[66] Id.

[67] Id.

[68] This calculation includes cases that had been filed or resolved as of October 20, 2020. See Schappa supra note 60.

[69] This number includes cases published through October 20, 2020. Commercial Docket Pilot Project, Wis. Court Sys., (last updated Sept. 24, 2020).

[70] See Georgia State-wide Business Court,

[71] See O.C.G.A. § 15-5A-3(a).

[72] See O.C.G.A. § 15-51-4.

[73] See

[74] See

[75] Case No. 20-CI-003079 (Jeff. Cir. Ct. June 20, 2020),

[76] See S.B. 976 (2019),

[77] Pennsylvania General Assembly, Bill Information History, Senate Bill 976; Regular Session 2019-2020,

[78] Business Courts History, supra note 1, at 176-180.

[79] See

[80] Through the Decades, supra note 8 at 2062.

[81] See, providing the rules and procedures of the chancery court in Wyoming.

[82] W.S. § 5-13-104(a).

[83] See W.S. § 5-13-115(a).

[84] See W.S. § 5-13-115(b).

[85] W.S. § 5-13-104-104.

[86] See Id.

[87] W.S. § 5-13-115(c).  However, the Chancery Court Committee in Wyoming may suggest a statutory amendment to provide further ancillary jurisdiction.

[88] W.S. § 5-13-103.

[89] See 21LSO-0027 v.0.3 Chancery Court vacancy amendments.

[90] See W.S. § 5-13-115(b).

[91] See

[92] No. CV 2020-093916, 2020 WL 4586233 (Ariz. Super. Ct. Aug. 5, 2020).

[93] No. N19C-06-054 EMD CCLD, 2020 LEXIS 2723 (Del. Super. Ct. July 27, 2020),

[94] No. N19C-10-212 AML CCLD, 2020 LEXIS 570 (Del. Super. Ct. July 31, 2020),

[95] No. N19C-05-275 MMJ CCLD, 2020 LEXIS 2745 (Del. Super. Ct. Aug. 20, 2020),

[96] See Danenberg v. Fitracks, Inc., 58 A.3d 991, 1001-04 (Del. Ch. 2012).

[97] No. 2020-012763-CA-44 (Fla. 11th Jud. Cir. Sept. 1, 2020) (Order On Assignee’s Motion to Determine Who Owns Assignor’s Attorney-Client and Accountant-Client Privileges).

[98] No. 20-CA-001233 (Fla. 13th Jud. Cir. April 30, 2020) (Order Denying Defendants’ Motion to Dismiss for Improper Venue Based Upon a Mandatory Forum Selection Clause).

[99] No. 49D01-1901-CT-000576, (Ind. Comm. Ct. Aug. 5, 2019), or

[100] No. 49D01-1901-CT-000576, (Ind. Comm. Ct. Dec. 12, 2019), or

[101] No. 49D01-2003-PL-009617 (Ind. Comm. Ct. July 31, 2020), or

[102] No. 49D01-2003-PL-009617 (Ind. Comm. Ct. Sept. 16, 2020), or

[103] No. 49D01-1911-PL-048001 (Ind. Comm. Ct. June 5, 2020), or

[104] No. LACL146273 (Iowa Dist. Ct. Nov. 12, 2019),

[105] No. BCD-CV-16-33 (Me. Business and Consumer Ct. Jan. 3, 2020),

[106] No. BCD-CV-18-04 (Me. Business and Consumer Ct. Jan 8, 2020),

[107] No. 480195V ((Md. Cir. Ct. Sept. 28, 2020),

[108] Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004).

[109] See McCormick v. Medtronic, Inc., 219 Md. App. 485, 527 (2014).

[110] Darcars Motors of Silver Spring, Inc. v. Borzym, 379 Md. 249, 270 (2004).

[111] No. 466145V (Md. Cir. Ct. Sept. 1, 2020),

[112] No. 461362V (Md. Cir. Ct. Nov. 12, 2019),

[113] See Md. Rule 2-231(b).

[114] No. 457043V (Md. Cir. Ct. Dec. 9, 2019),

[115] E.I. Du Pont de Nemours & Co. v. Forma-Pack, Inc., 351 Md. 396, 414 (1998).

[116] No. 1984CV02597-BLS1, 2020 Mass. Super. LEXIS 6 (Mass. Super Ct. Jan. 16, 2020).

[117] No. 1784CV02731-BLS2, 2020 Mass. Super. LEXIS 36 (Mass Super. Ct. Mar. 31, 2020).

[118] No. 2084CV00808-BLS2, 2020 Mass. Super. LEXIS 70 (Mass. Super. Ct. Apr. 16, 2020).

[119] No. 13-10616-CKB (Kent County Cir. Ct. Jan. 29, 2020),,%202020).pdf.

[120] See Mich. Comp. L. § 500.3114 (1) on priority.

[121] The husband omitted the wife’s name, date of birth, and all other identifying information; however, he did provide all identifying information for his daughter and listed her as a named insured.

[122] No. 17-777-CB (Ingham County Cir. Ct. Jan. 7, 2020),,%202020).pdf.

[123] No. 20-179615-CB (Oakland County Cir. Ct. July 28, 2020),,%202020).pdf.

[124] No. 18-002677-CB (Wayne County Cir. Ct. Mar. 4 2020),,%202020)%202.pdf.

[125] No. 217-2019-CV-0849 (N.H. Super. Ct. Mar. 26, 2020),

[126] No. 218-2019-CV-1780 (N.H. Super. Ct. Apr. 12, 2020),

[127] No. 218–2019–CV–198 (N.H. Super. Ct. Apr. 27, 2020),

[128] No. 218–2019–CV–00198 (N.H. Super. Ct. May 15, 2020),

[129] No. 216-2020-cv-0476 (N.H. Super. Ct. June 30, 2020),

[130] Docket No. BER-L-8213-17 (N.J. Super. Law Div. March 22, 2020),

[131] Docket No. BER-L-6069-19 (N.J. Super. Law Div. May 13, 2020),

[132] 2020 N.Y. Slip Op. 33003(U), 2020 N.Y. Misc. LEXIS 5706 (N.Y. Sup. Ct. Sept. 9, 2020),

[133] FR Holdings, FLP v. Homapour, 154 A.D.3d 936, 937–38, 63 N.Y.S.3d 89, 91 (2d Dep’t 2017).

[134] Matter of Fassa Corp., 31 Misc. 3d 782, 785, 924 N.Y.S.2d 736 (N.Y. Sup. Ct. 2011); Matter of 47th Rd. LLC, 54 Misc. 3d 1217[A], 54 N.Y.S.3d 610 (N.Y. Sup. Ct. 2017).

[135] 2018 N.Y. Slip Op. 32008(U), 2018 WL 3953795 (N.Y. Sup. Ct. Aug. 17, 2018).

[136] No. 651992/2020, 2020 BL 308734 (N.Y. Sup. Ct. July 15, 2020),

[137] N.Y. Gen. Oblig. Law § 5-1401 provides for the enforcement of choice-of-law provisions in contracts over $250,000 and N.Y. Gen. Oblig. Law § 5-1402 provides for the enforcement of forum selection provisions in contracts over $1 million.

[138] Index No. 655045/2019, NYSCEF Doc. No. 49 (N.Y. Sup. Ct. June 15, 2020),

[139] 651349/2019, 2020 WL 129669, slip. op. at *3 (N.Y. Sup. Ct. Mar. 16, 2020),

[140] No. 17-CVS-7086, 2020 NCBC 35 (N.C. Super. Ct. Apr. 27, 2020),

[141] No. 18-CVS-1050, 2019 NCBC 81 (N.C. Super. Ct. Dec. 31, 2019),

[142] No. 18-CVS-3078, 2020 NCBC 53 (N.C. Super. Ct. July 21, 2020),

[143] No. 19-CVS-244, 2019 NCBC 79 (N.C. Super. Ct. Dec. 20, 2019),

[144] No. 18-CVS-13891, 2020 NCBC 56 (N.C. Super. Ct. Aug. 4, 2020),

[145] June Term 2015 No. 00691, (C.C.P. Phila. Jan. 27, 2020) (Djerassi, J.),, aff’d in part, reversed in part, No. 1285 EDA 2019 (Pa. Super. Ct. Oct. 14, 2020),

[146] Oct. Term 2018, No. 03237 (Feb. 12, 2020) (Glazer, J.),    

[147] Dec. Term 2017, No. 00051 (Mar. 2, 2020) (Djerassi, J.),

[148] C.A. No. PC-2015-5141 (R.I. Super. Ct. Sept. 18, 2019) (Licht, J.),

[149] C.A. No. PB-2011-2488 (R.I. Super. Ct. Sept. 9, 2019) (Taft-Carter, J.),

[150] C.A. No. PC-2012-0341 PM-2012-1218 (R.I. Super. Ct. Apr. 30, 2020) (Taft-Carter, J.),

[151] C.A. No. PC-2018-8928 (R.I. Super. Ct. Aug. 28, 2019) (Stern, J.),

[152] C.A. No. PC-2018-1076 (R.I. Super. Ct. Aug. 8, 2019) (Silverstein, J.),

[153] No. 20-0282 (Tenn. Ch. Ct. 20th Jud. Dist. July 22, 2020),

[154] No. 19-1542 (Tenn. Ch. Ct. 20th Jud. Dist. May 19, 2020),

[155] No. 15-780-BC (Tenn. Ch. Ct. 20th Jud. Dist. April 22, 2020),

[156] No. 18-C-271 (W. Va. Cir. Ct. Wood Cnty. Mar. 7, 2020) (Order denying third-party defendants’ motion to dismiss),

[157] No. CC-24-2018-C-130 (W. Va. Cir. Ct. Marion Cnty. July 30, 2020) (Order granting plaintiff’s renewed motion for summary judgment),

[158] No. 18CV1639 (Wis. Cir. Ct. Waukesha Cnty. Aug. 10, 2020),

[159] 2012 WI 16, 338 Wis. 2d 695, 809 N.W.2d 37 (2012).

[160] CapitalPlus Equity, LLC v. Glenn Rieder, Inc., No. 17-CV-639-JPS, 2018 WL 276352, at *4 (E.D. Wis. Jan. 3, 2018).


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