The Business Litigation Blog

Archive for tag: shareholder dispute

LLCs Protect Real Estate Investors

The New York Times of April 30, 2018, had an article about Limited Liability Companies, some of which own real estate, and take advantage of the anonymity and limited liability features offered by the Limited Liability Company Acts existing in most states.  These protections are not available to most small real estate investors.  Most banks will not finance the purchase of a two-flat or a three-flat by an LLC.  Only the larger investors such as Sean Hannity, who invested in troubled properties through a large LLC, can take advantage of this.  The Times missed another issue, one that affects corporations and LLCs.  The proliferation of corporate and LLC affiliates, subsidiaries, and parents can work a fraud on the unsuspecting.  One LLC will have two members, each an LLC, each of those LLC...

Cabela's Facing Shareholder Lawsuit

Four class action lawsuits have been filed by Cabela's shareholders against Cabela's in the month of June. the've all been filed in the U.S. District Court in Delaware, the state in which Cabela's is incorporated. The lawsuits were filed in response to a Cabela's shareholder meeting to approve the sale of Cabela's to Bass Pro Shops. The allegations include Cabela's making "incompplete and materially misleading" statements to investors and that their financial advisor has conflicts of interest. Cabela's intends to defend the litigation vigorously.  If you have a shareholder dispute get in touch with Thomas E. Patterson at or (312)-223-1699. 

Qualcomm Hit With Shareholder Dispute for Creating Too Many Lawsuits

Without acknowledging the Irony, Qualcomm’s shareholders have sued the company because it got sued. Qualcomm has been sued for breach of contract by Apple. Apple is currently refusing to pay the company for their chips until pending litigation is over. Qualcomm has been sued for a securities and exchange violation by the FTC. They’ve been sued by chip developers for unfair competition in their licensing. Qualcomm’s shareholders are adding another one, suing Qualcomm because of the number of lawsuits against Qualcomm. If you have a shareholder dispute, breach of contract, or unfair competition claim contact Thomas E. Patterson or Patterson Law Firm at or (312)-223-1699. 

Snap Involved in Shareholder Lawsuit

Snap Inc., the parent company of Snapchat, was sued for allegedly misrepresenting how many people used the snapchat app. The lawsuit was filed in the U.S. District Court in Los Angeles by a shareholder. The misrepresentation of the user base is being blamed for a drop in the price of the company’s shares. Lawsuits filed after a stock loses value are often defeated before trial. Damages have not been specified and a class-action designation is being sought. If you have a shareholder dispute, contact Thomas E. Patterson or Patterson Law Firm at or (312)-223-1699. 

Shareholder Lawsuit Filed Against Tesla Board of Directors

A group of shareholders in Tesla filed a lawsuit against Elon Musk, Tesla, and the rest of the board of directors at Tesla. This suit has been filed because of the acquisition of SolarCity Corp., which is the biggest solar energy provider in America. More than 85% of shareholders voted yes to this acquisition. The shareholders allege that there have been violations of federal securities laws and state laws. The case is now under seal in a Delaware court. This is not the only lawsuit Tesla is experiencing. Tesla also has two harassment lawsuits pending. If you have a shareholder dispute contact Thomas E. Patterson or Patterson Law Firm or (312)-223-1699. 

Wells Fargo Will Have to Face Shareholder Dispute Lawsuit

Wells Fargo’s business practice of “Hit the Streets Thursday” used Latino employees to target undocumented immigrants into opening bank accounts. The tactics also had employees urging potential clients to open accounts with free money or by waiving check-cashing fees. Signing up for an account was seen as a sale in Wells Fargo’s eyes. More accounts meant better numbers. The banks did this to meet daily and monthly quotas of signing up new members. This new information came to light after shareholders and the board of directors sued when accounts were opened without the authorization of clients. Wells Fargo was hit with $185 million dollars in regulatory fees before the shareholders filed a complaint. From executives to branch employees, everyone but the board and stakeholders were aware of the unsavory business practi...

J.C. Penny Settles Shareholder Dispute for $97.5 Million

J.C. Penny recently settled a shareholder lawsuit related to when the company was struggling in 2013. Dishonest about the liquidity of the company, the former CEO and CFO did not see any need to raise capital. In 2013, 84 million of stock was issued to raise 800 million dollars. This heavily diluted the existing 220 million shares. The shareholders sued over this dilution J.C. Penny “denied” the allegations in the lawsuit, “but entered into this settlement to eliminate the uncertainties, burden and expense of further protracted litigation.” J.C. Penny will not have to fund the settlement because insurance will pay. J.C. Penny is in debt $5.8 billion and currently pay interest of $400 million a year. If you have a shareholder dispute contact Thomas E. Patterson or Patterson Law Firm at ...

Director with no ownership interest in corporation lacked standing to maintain derivative suit

Plaintiff filed direct and derivative claims against a family charitable foundation on which he served as a director. Under Indiana law, only a shareholder or a member of a corporation may bring a derivative action on the corporation’s behalf. However, the foundation’s articles of incorporation stated that it shall have no members. Plaintiff argued that the ownership requirement should not apply because there are no shareholders or members of the foundation and without allowing directors to sue, the foundation would face no oversight. The court rejected that argument, citing to myriad other remedies under the Nonprofit Corporation Act. Doermer v. Kathryn Callen, No. 15-3734 (7th Cir. Feb. 1, 2017)

Cancellation of shares through merger deprives stockholder of standing under Section 220 to inspect books and records

In August 2016, Monster entered into a merger agreement with Randstad in which Randstad would acquire Monster stock in a tender offer through a subsidiary. The tender offer expired on October 28, 2016 and, on November 1, 2016, any remaining stock was canceled and converted to cash. On October 19, 2016, the plaintiff issued a Section 220 inspection demand. Monster denied the request. After the merger, plaintiff filed suit to compel the inspection. The Chancery Court dismissed based on the text of Section 220, which allows a stockholder to inspect books and records of the corporation in certain circumstances. Under Section 220, the plaintiff must establish that he is a stockholder. Since the plaintiff was not a stockholder at the time of filing – even though he was at the time of his demand – he lacked standing to pursue a ...

Personal relationships among shareholders provided evidence of director lack of independence

A Zynga shareholder filed a derivative suit for breach of fiduciary duty by certain directors and officers that sold shares in a secondary stock offering. After the offering, the stock price fell significantly. The case was dismissed because the plaintiff failed to allege demand futility. The Delaware Supreme Court reversed, finding the plaintiff adequately alleged a majority of the directors were conflicted. Of note, it found that one director was not independent because she and her husband co-owned a private airplane with Zynga’s founder and majority shareholder, which the court found evidenced a close and personal relationship preventing the director from acting independently. Sandys v. Pincus, No. 157, 2016 (Del. Dec. 5, 2016)

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