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

Plaintiffs filed a putative class action against defendants, a group of developers and their agents or affiliates, claiming that defendants' business practices violated California's Unfair Competition Law (UCL), Cal. Bus. & Prof. Code 17200 et seq. Plaintiffs specifically alleged that defendants failed to make certain disclosures as required by the Interstate Land Sales Full Disclosure Act (ILSA), 15 U.S.C. 1701 et seq. Although defendants concede that they failed to comply with the disclosure requirements, they raise certain affirmative defenses. The district court rejected defendants' claims and granted partial summary judgment for plaintiffs. In this interlocutory appeal, the court affirmed the judgment. The court concluded that, because the UCL's four-year statute of limitations and its accompanying accrual rules apply, the district court properly concluded that plaintiffs’ UCL claim is not time-barred; defendants failed to overcome the strong presumption against preemption, and ILSA’s three-year statute of limitations does not bar plaintiffs’ UCL claim; plaintiffs' units are "lots" and are therefore subject to ILSA's disclosure requirements; the Improved Lot Exemption does not extinguish plaintiffs’ claims; the text and interpretive history of the statute lead to the conclusion that the agency’s interpretation of “lot” is reasonable and entitled to Chevron deference; and the 2014 Amendment to ILSA does not retroactively apply to the present action where the amendment was a substantive change in the law. Accordingly, the court affirmed the judgment. View "Beaver v. Tarsadia Hotels" on Justia Law

Plaintiff, the court appointed receiver for PEMGroup, filed suit against Stonefield, the CPAs who audited the financial statements for six of PEMGroup's fraudulent offerings, contending that Stonefield’s reports and related conduct materially misrepresented PEMGroup’s financial condition, allowing PEMGroup’s management to prolong the life of their scheme and to loot and to dissipate assets from PEMGroup. The district court dismissed plaintiff's claims of professional negligence and aiding and abetting the wrongful conversion of PEMGroup's assets. The court concluded that the district court properly concluded that to survive summary judgment, plaintiff would have to offer substantial evidence – meaning sufficient evidence to justify a verdict in his favor – that investors reasonably relied on Stonefield’s audits in order to show causation. In this case, before the district court and at oral argument, plaintiff admitted he did not submit direct evidence that investors relied on Stonefield’s audit reports or how PEMGroup used them. Further, the court concluded that the district court did not err in sua sponte dismissing plaintiff’s unjust enrichment claim. Accordingly, the court affirmed the judgment. View "Mosier v. Stonefield Josephson, Inc." on Justia Law

WCI was owned by WB Acquisition, which was owned by WBPartners, which in turn was owned by Daren Barone’s and Gregory Watkins’s holding corporations. WCI and WB Partners formed a joint venture called the NTC Joint Venture. The joint venture’s structure had significant federal income tax consequences. While the NTC project was ongoing, WCI sold its assets to Kuranda. WB Partners, WB Acquisition, and Barone's holding corporation (collectively, Taxpayers) challenged certain tax deficiencies identified by the Commissioner. In three consolidated decisions, the Tax Court found that the NTC Joint Venture was not a valid partnership for tax purposes, and therefore that all of the joint venture’s profits were taxable income to WCI. The Tax Court determined that all of the proceeds from the noncompetition agreement were income to WCI as well. Because WCI had substantially understated its income, the Tax Court upheld the Commissioner’s assessment of accuracy-related penalties. The court concluded that income from the NTC Project attributed to WB Partners was in fact income to WCL; proceeds from the noncompetition agreement were income to WCI rather than WB Partners; and the Tax Court properly assessed accuracy-related penalties. Accordingly, the court affirmed the judgment. View "DJB Holding Corp. v. Commissioner" on Justia Law

Seismic Reservoir 2020, Inc. (Seismic), a California company, brought suit against Bjorn Paulsson. Paulsson counterclaimed against two Canadian directors of Seismic arising from his status as a shareholder and director of Seismic’s parent company, a corporation existing under the laws of Province of Alberta, Canada. Paulsson sought damages for breach of fiduciary duties owed by directors of the Alberta company under section 242 of the Alberta Business Corporations Act. The district court dismissed the counterclaim pursuant to Fed. R. Civ. P. 12(b)(1) for lack of jurisdiction, concluding that it could not issue a remedy under the Alberta statute. A panel of the Ninth Circuit affirmed, holding (1) the district court had jurisdiction to entertain the controversy; and (2) the district court should have dismissed Paulsson’s counterclaim under Fed. R. Civ. P. 12(b)(6) for failure to state a cause of action rather than under Rule 12(b)(1) because Paulsson’s counterclaim arising under the Alberta Act did not raise a cause of action for which the district court could grant relief. View "Paulsson v. Dorosz" on Justia Law

The government filed a civil complaint seeking forfeiture of funds held in a brokerage account. The clerk entered a default against Appellants and all other potential claimants. The district court granted the government’s motion for entry of default and, concluding that Appellants could not allege a meritorious defense, refused to grant their motion to set aside the default judgment under Fed. R. Civ. P. 60(b)(1). The court did not specifically articulate any “extreme circumstances” justifying entry of default and default judgment. A panel of the Ninth Circuit affirmed, holding (1) courts reviewing a Rule 60(b) motion must apply the factors outlined in Falk v. Allen to ensure that the “extreme circumstances” policy is recognized, but nothing in Rule 60(b) nor the Court’s precedent requires a district court to articulate on the record particular “extreme circumstances” before it denies a motion to set aside a default judgment; and (2) after applying the Falk factors, it is clear that Appellants had no meritorious defense, and therefore, the district court did not abuse its discretion in denying Appellants’ Rule 60(b)(1) motion. View "United States v. Aguilar" on Justia Law

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