Justia U.S. 9th Circuit Court of Appeals Opinion Summaries

At issue in this shareholder class action was the Schwab Total Bond Market, a mutual fund (the Fund). The Fund was created by Schwab Investments (“Schwab Trust”), and its investment adviser was Charles Schwab Investment Management, Inc. (“Schwab Advisor”). The named plaintiff, a registered investment advisery and financial planning firm that had over 200,000 shares of the Fund under its management, filed the class action on behalf of investors who alleged that the managers of the Fund failed to adhere to the Fund’s fundamental investment objectives. The district court dismissed the complaint. The Ninth Circuit reversed in part, vacated in part, and remanded, holding (1) Northstar had standing to prosecute this case; (2) the district judge erred in dismissing Northstar’s breach of contract claims, as Northstar adequately alleged the formation of a contract between the investors and the trustees; (3) the district judge erred in concluding that Northstar failed to successfully allege a breach of any duty owed directly to Fund investors and that those claims would have to be asserted derivatively; and (4) the district judge erred in dismissing Northstar’s third-party beneficiary breach of contract claim, as Northstar adequately alleged that the investors were third-party beneficiaries of the Investment Advisory and Administration Agreement between Schwab Trust and Schwab Advisor. View "Northstar Fin. Advisors v. Schwab Investments" on Justia Law

Shareholders are required to make a “demand” on the corporation’s board of directors before filing a derivative suit, unless they sufficiently allege that demand would be futile. Before Arduini filed his derivative action against IGT and its board, four shareholders filed derivative suits that were consolidated. They argued that a demand was excused because: the IGT board extended the employment contract of IGT’s former CEO and chairman of IGT’s board of directors, and allowed him to resign rather than terminating him for cause; three directors received such high compensation from IGT that their ability to impartially consider a demand was compromised; six directors faced a substantial likelihood of liability for breaches of their fiduciary duties as committee members; and that other members had engaged in insider trading. The district court dismissed the consolidated suit for failure to make a demand or sufficiently allege futility; the Ninth Circuit affirmed. The district court then dismissed Arduini’s action, holding that Arduini had failed to make a demand and could not allege demand futility based on issue preclusion due to its ruling in the prior suit. The Ninth Circuit affirmed, holding that under Nevada law and these facts, issue preclusion barred relitigation of futility. View "Arduini v. Int'l Gaming Tech." on Justia Law

This case arose when plaintiffs signed an Asset Purchase Agreement to purchase a Mercedes-Benz dealership from Asbury. Plaintiffs filed suit against MB after MB exercised a right of first refusal (ROFR) contained in its dealership agreement with Asbury. The district court granted summary judgment in favor of defendants. The court concluded that, because MB exercised its ROFR, plaintiffs have no claim for intentional interference with prospective economic advantage, which requires plaintiffs to demonstrate that MB committed a legal wrong independent from the interference; nor can MB's conduct be considered wrongful and plaintiffs have no claim for intentional interference with contract; plaintiffs have no claim for fraudulent concealment where plaintiffs misinterpreted the Acknowledgement Agreement as a guaranty and because the purportedly concealed facts of that agreement were not material and had been disclosed already to plaintiffs or were readily discoverable; even if plaintiffs were entitled to notice from MB of its exercise of the ROFR, the notic eplaintiffs received was both timely and in proper form; because plaintiffs have an implied right of action under California Vehicle Code 11713.3(t)(6), the court reversed summary judgment as to this claim; and the court affirmed the grant of summary judgment to MB on plaintiffs' claim under California's Unfair Competition Statute, Cal. Bus. & Prof. Code 17200. Accordingly, the court affirmed in part, reversed in part, and remanded. View "Fresno Motors v. Mercedes-Benz" on Justia Law

Allergan, the pharmaceutical manufacturer of Botox, settled several qui tam suits concerning allegations that it had acted illegally in marketing and labeling Botox, and pled guilty in a criminal case. Plaintiffs, all Allergan shareholders, subsequently filed a derivative action alleging that Allergan's directors are liable for violations of various state and federal laws, as well as breaches of their fiduciary duties to Allergan. Plaintiffs failed to make a demand on Allergan's board requesting that Allergan bring the derivative claims in its own name. The court concluded that the district court misapplied governing Delaware law and improperly drew inferences against plaintiffs rather than in their favor when the district court dismissed the action on the ground that plaintiffs failed to allege particularized facts showing that demand was excused under Federal Rule of Civil Procedure 23.1. The court concluded that demand was excused where plaintiffs' particularized allegations established a reasonable doubt as to whether the Board faces a substantial likelihood of liability and as to whether the Board is protected by the business judgment rule. Accordingly, the court reversed the judgment of the district court.View "Rosenbloom v. Pyott" on Justia Law

Plaintiffs, small business owners, filed a class action suit alleging that Yelp, an online forum, extorted or attempted to extort advertising payments from them by manipulating user reviews and penning negative reviews of their businesses. Plaintiffs filed suit against Yelp for violations of California's Unfair Competition Law (UCL), Cal. Bus. & Prof. Code 17200 et seq.; civil extortion; and attempted civil extortion. The district court dismissed the suit for failure to state a claim. The court concluded that Yelp's manipulation of user reviews, assuming it occurred, was not wrongful use of economic fear, and that the business owners pled insufficient facts to make out a plausible claim that Yelp authored negative reviews of their businesses. Therefore, the court agreed with the district court that these allegations did not support a claim for extortion. The court held that, to state a claim of economic extortion under both federal and California law, a litigant must demonstrate either that he had a pre-existing right to be free from the threatened harm, or that the defendant had no right to seek payment for the service offered. Given these stringent standards, plaintiffs failed to sufficiently allege that Yelp wrongfully threatened economic loss by manipulating user reviews. None of the business owners have stated a claim of "unlawful" conduct on the basis of extortion. Therefore, the court dismissed the separate claims of civil extortion and attempted civil extortion. Further, plaintiffs' UCL claim failed under the "unfair" practices prong. Accordingly, the court affirmed the judgment of the district court.View "Levitt v. Yelp! Inc." on Justia Law

ASARCO, LLC ("Asarco") appealed the district court's dismissal of its contribution action brought under section 113(f) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). Asarco sought to recover from Union Pacific Railroad Co. and Union Pacific Corp. a share of $482 million in cleanup costs Asarco paid for environmental harm at the Coeur d'Alene Superfund Site in Northern Idaho. The district court dismissed the action under Federal Rule of Civil Procedure 12(b)(6), concluding that although Asarco's claim was timely, it was barred by a 2008 settlement agreement between the parties that settled Union Pacific's claims against Asarco at the same site. Upon review, the Ninth Circuit concluded that Asarco's claim was timely, but that the parties' 2008 settlement agreement did not unambiguously release Asarco's claim in this case. Therefore reversed the district court's judgment dismissing the case under Rule 12(b)(6). View "ASARCO LLC v. UPRC, et al" on Justia Law

The Commissioner disallowed petitioner's claimed deduction on his 1999 tax return for a capital loss purportedly generated by several Cayman Islands entities. Petitioner invested in an Offshore Portfolio Investment Strategy (OPIS) in order to reduce the tax liability associated with petitioner's strategy of either taking his company, DiTech, public or selling it. The Tax Court affirmed. Applying the economic substance doctrine, the court concluded that the record amply supported the Tax Court's factual conclusion that petitioner pursued the OPIS product solely for its tax benefits and that the Tax Court had ample record support for its factual conclusion that the OPIS transaction had no practical economic effects other than the creation of income tax losses. Accordingly, the court affirmed the judgment of the district court. View "Reddam v. CIR" on Justia Law

The FTC filed suit against BurnLounge, a multi-level marketing business, alleging violation of section 5(a) of the Federal Trade Commission Act (FTCA), 15 U.S.C. 45(a)(1). The court agreed with the district court that BurnLounge was an illegal pyramid scheme in violation of the FTCA, in light of Webster v. Omnitron International, Inc., because BurnLounge's focus was recruitment, and because the rewards it paid in the form of cash bonuses were tied to recruitment rather than the sale of merchandise. Further, the district court did not abuse its discretion by admitting the FTC's expert's testimony because it was relevant and reliable. Accordingly, the court affirmed the district court's order granting a permanent injunction against BurnLoundge's continued operation. View "FTC v. BurnLounge, Inc." on Justia Law

This appeal stemmed from the sale of the Chronicle Publishing Company. After the Martin Family Trusts formed a tiered partnership structure, the Martin heirs commenced a series of transactions designed to create losses that would offset the taxable gain realized from the Chronicle Publishing sale. On appeal, taxpayers argued that the 2000-A Final Partnership Administrative Adjustment (FPAA) was time-barred by the restrictive language in the extension agreements. The court agreed with the district court that the extension agreements between the IRS and First Step encompassed adjustments made in the 2000-A FPAA that were directly attributable to partnership flow-through items of First Ship; the FPAA to 2000-A extended the limitations period for assessing tax beyond the extension agreements and through the present litigation; however, the agreements did not extend to adjustments in the 2000-A FPAA that were not directly attributable to First Ship; and because the district court held more broadly that "the extension agreements encompass the adjustments made by the IRS in the FPAA issued to 2000-A," the court remanded to the district court to make a determination of which adjustments in the 2000-A FPAA were directly attributable to partnership flow-through items of First Ship. The court affirmed in part and reversed in part. View "Candyce Martin 1999 Irrevocable Trust v. United States" on Justia Law

Rock River, a producer, seller, and distributor of music records, filed suit against UMG, alleging that UMG inappropriately blocked Rock River from distributing its album of Bob Marley and the Wailers remixes by wrongfully threatening to sue Rock River's distributors. The district court ruled in favor of UMG. The court remanded Rock River's intentional interference with prospective economic advantage (IIPEA) claim for trial where it had not yet been established that Rock River's album violated the exclusive licensing rights of UMG or any other entity, and there remains a triable issue as to whether San Juan Music Group has licensing rights to all of the underlying recordings or whether UMG has the exclusive licensing rights to one or more of the recordings; the court could not affirm the district court's grant of summary judgment to UMG on the alternative basis of Noerr-Pennington immunity because a reasonable jury could conclude that UMG's cease-and-desist communications satisfied both criteria of the sham exception; and the court affirmed the district court's ruling that UMG did not implicitly waive privilege over its attorney-client communications. Accordingly, the court affirmed in part, reversed in part, and remanded. View "Rock River Commc'n v. Universal Music Group" on Justia Law