Articles Posted in Business Law

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This case provided the Supreme Court with the opportunity to clarify Cohen v. Mirage Resorts, Inc., 62 P.3d 720 (Nev. 2003), and distinguish between direct and derivative claims by adopting the direct harm test as articulated in Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004), which allows a direct claim when a shareholder injury is independent from corporate injury. At issue in this case was whether shareholders lacked standing to sue a corporation and its directors because the shareholders’ claims were derivative, rather than claims asserting a direct injury. Applying Tooley’s direct harm test to the facts of this case, the Supreme Court held that the shareholders’ complaint alleged derivative dilution claims, not direct claims. The court thus instructed the district court to dismiss the complaint without prejudice to the shareholders’ ability to file an amended complaint. View "Parametric Sound Corp. v. Eighth Judicial District Court" on Justia Law

Posted in: Business Law

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In these consolidated appeals, the Supreme Court addressed the appropriate legal standard for a district court’s consideration of a special litigation committee’s (SLC) recommendation that derivative claims should be dismissed because pursuing those claims would not be in the company’s best interest. In this case, the district court deferred to the SLC’s decision, dismissed the suit brought derivatively on behalf of DISH Network Corporation, and awarded costs to the SLC. The Supreme Court affirmed the district court’s order granting the SLC’s motion to defer and vacated the portion of the district court’s order awarding costs for teleconferences because it lacked justifying documentation, holding (1) courts should defer to the business judgment of an SLC that is empowered to determine whether pursuing a derivative suit is in the best interest of a company where the SLC is independent and conducts a good-faith, thorough investigation, see Auerbach v. Bennett 393 N.E.2d at 996 (N.Y. 1979); and (2) the district court did not abuse its discretion in determining that the SLC was independent and that the SLC conducted a good-faith and thorough investigation. View "In re Dish Network Derivative Litigation" on Justia Law

Posted in: Business Law

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Wynn Resorts filed a lawsuit against Kazuo Okada, a former member of the board of directors of Wynn Resorts. As part of the discovery process, Wynn Resorts noticed Okada’s deposition for over the course of ten days in Las Vegas even though Okada resides in Hong Kong and owns businesses in Tokyo, Japan. Okada filed a motion for a protective order, asserting that his deposition should presumptively be conducted in Hong Kong or in Tokyo and that the deposition should not exceed three days. The district court denied his motion. Okada filed this writ petition, contending that the district court ignored a common-law presumption that his deposition should take place where he resides that that the district court erred in departing from Nev. R. Civ. P. 30(d)(1)’s presumption that depositions should be limited to one day. The Supreme Court denied Okada’s request for writ relief, holding that the district court did not abuse its discretion in (1) rejecting Okada’s argument regarding the common-law presumption and in determining that Okada failed to demonstrate good cause for having his deposition moved to a location other than Las Vegas; and (2) departing from Rule 30(d)(1)’s presumptive one-day time frame and adopting Wynn Resorts’ ten-day proposal. View "Okada v. Eighth Judicial Dist. Court" on Justia Law

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The purchasers of condominiums at a Las Vegas resort filed suit against approximately forty defendants, including JDI Loans, LLC and JDI Realty, LLC (collectively, the JDI entities), alleging that the resort’s marketing material represented that it was in a partnership with the JDI entities, that several defendants engaged in actionable wrongdoings, and that the JDI entities were liable for these actionable wrongdoings under Nev. Rev. Stat. 87.160(1), which codifies the partnership-by-estoppel doctrine. The district court granted summary judgment for the JDI entities as to their liability under section 87.160(1), concluding that a “reference to a ‘strategic partner’” in the marketing materials was insufficient to establish partnership by estoppel. The Supreme Court reversed after clarifying the partnership-by-estoppel doctrine, holding that genuine issues of material fact precluded summary judgment to the JDI entities with regard to their liability under Nev. Rev. Stat. 87.160(1). View "In re Cay Clubs" on Justia Law

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A stock transfer agent gave a stockholder an allegedly incomplete and misleading answer to a question about its requirements for removing a restrictive legend on the stockholder’s stock. The stockholder sued the transfer agent, asserting claims for violation of Nev. Rev. Stat. 104.8401 and 104.8407, negligent and fraudulent misrepresentation, aiding and abetting a breach of fiduciary duty, and conspiracy. Under sections 104.8401 and 104.8407, a transfer agent must, on proper request, register a transfer of securities without unreasonable delay. The district court granted the transfer agent’s motion for summary judgment. The Supreme Court affirmed, holding (1) sections 104.8401 and 104.8407 did not support liability in this case because the stockholder did not ask the transfer agent to remove the legend and reissue him clean shares, and because the stockholder never submitted a transfer request, the agent’s statutory duty to register a requested transfer did not arise; and (2) the stockholder’s common law claims failed on the grounds that they were not supported by competent evidence. View "Guilfoyle v. Olde Monmouth Stock Transfer" on Justia Law

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After Appellants purchased condominiums and engaged in related transactions at the Las Vegas Cay Club resort, Appellants filed suit against dozens of defendants, including Cay Clubs, Jeffrey Aeder, and JDI Loans, LLC and JDI Realty, LLC (together, the JDI entities), alleging that Defendants engaged in wrongdoings while abandoning a plan to improve Las Vegas Cay Club and leaving Appellants with “worthless property.” Appellants claimed that they bought the condominiums on the belief that a partnership between Cay Clubs and the JDI entities existed that would provide the expertise and resources to execute the resort’s transformation. Aeder and the JDI entities successfully moved for summary judgment with respect to their liability under Nev. Rev. Stat. 87.160(1), which codifies the partnership-by-estoppel doctrine. The Supreme Court reversed after clarifying the meaning and application of section 87.160(1), holding that the district court erred in granting summary judgment to the JDI entities with regard to their liability under the partnership-by-estoppel doctrine. View "In re Cay Clubs" on Justia Law

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Petitioner brought a shareholder derivative suit on behalf of real party in interest Universal Travel Group (UTG) against the officers and directors of the UTG (collectively, the Jiang parties). The Jiang parties all resided in China. When Petitioner was unable to locate the Jiang parties' addresses, Petitioner moved the district court pursuant to Nev. R. Civ. P. 4(e)(1) to permit service by publication. UTG opposed the motion, arguing that Petitioner was required to comply with the terms of the Hague Convention (Convention). UTG later provided Petitioner with the Jiang parties' addresses in China. The district court denied Petitioner's motion to permit service of publication, concluding that such service was not allowed by the Convention when a defendant's address is known. The district court then ordered to serve the Jiang parties in compliance with the terms of the Convention. Petitioner filed this petition for a writ of mandamus or prohibition, arguing that the terms of the Convention did not apply in this case. The Supreme Court denied the petition, holding that, based on the plain language of Rule 4(e)(1), a party residing outside of the United States whose address is known must be served according to the terms of the Convention. View "Loeb v. First Judicial Dist. Court" on Justia Law

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Judgment creditors obtained judgments in Florida against Jeffrey Kirsch and various entities he created (collectively, judgment debtors). Kirsch also created Rock Bay, a Nevada company. After the Florida litigation began, a series of monetary transfers occurred between Rock Bay and the judgment debtors. When the judgment creditors were unsuccessful in executing their judgments on the judgment debtors' assets, they domesticated the Florida judgments in Nevada. Kirsch voluntarily dissolved Rock Bay one week later. The judgment creditors then served a subpoena on a Las Vegas accounting firm that performed accounting services for the judgment debtors and Rock Bay, seeking records related to the judgment debtors and Rock Bay. Rock Bay unsuccessfully moved to quash the subpoena on the ground that it was not a party to the underlying litigation. The Supreme Court found the district court did not exceed its authority over Rock Bay, holding that discovery of a nonparty's assets under Nev. R. Civ. P. 69(a) is not permissible absent special circumstances, including those in which the relationship between the judgment debtor and the nonparty raises reasonable suspicion as to the good faith of asset transfers between the two, or in which the nonparty is the alter ego of the judgment debtor. View "Rock Bay, LLC v. Dist. Court" on Justia Law

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Appellants Consipio Holding, BV; Ilan Bunimovitz; Tisbury Services, Inc.; and Claudio Gianascio (collectively, Consipio) are shareholders of Private Media Group, Inc. (PRVT). In August 2010, Consipio filed a complaint in the Nevada district court, seeking injunctive relief and the appointment of a receiver for PRVT. Consipio also asserted derivative claims on behalf of PRVT against PRVT's former CEO and president, Berth H. Milton, Jr., and against officer and director respondents Johan Carlberg (PRVT director), Peter Dixinger (PRVT director), Bo Rodebrant (PRVT director), Johan Gillborg (former PRVT CFO), and Philip Christmas (PRVT subsidiary CFO). The claims focused on respondents' alleged conduct in assisting Milton, Jr., to financially harm PRVT for their personal gain. The complaint alleged that respondents assisted Milton, Jr., in obtaining significant loans for himself and entities he controls. It further stated that respondents failed to demand repayment on these loans and that they helped Milton, Jr. by removing funds from PRVT and concealing the wrongdoing. Given these allegations, Consipio contended that respondents collectively were guilty of misfeasance, malfeasance, and breach of their fiduciary duties. The issue before the Supreme Court was whether Nevada courts could properly exercise personal jurisdiction over nonresident officers and directors who directly harm a Nevada corporation. The Court concluded that they can. In this case, the district court failed to conduct adequate factual analysis to determine whether it could properly exercise personal jurisdiction over the respondents before dismissing the complaint against them. Accordingly, the Supreme Court vacated the dismissal order and remanded this case to the district court for further proceedings. View "Consipio Holding, BV v. Carlberg" on Justia Law

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Petitioners Club Vista Financial Services and others (Club Vista) entered into a real estate development project with real parties in interest Scott Financial Corporation and others (Scott Financial). When a loan guaranteed by some of the Petitioners went into default, Club Vista filed an action against Scott Financial. During discovery, Scott Financial obtained a deposition subpoena for Club Vista's attorney, K. Layne Morrill. An Arizona court granted Morrill's motion to quash the subpoena. The Nevada district court, however, denied Morrill's motion for a protective order and permitted Scott Financial to depose Morrill as to the factual matters supporting the allegations in the complaint. The Supreme Court granted Morrill's petition for writ of mandamus or prohibition in part after adopting the framework espoused by the Eighth Circuit Court of Appeals in Shelton v. American Motors Corp., which states that the party seeking to depose opposing counsel must demonstrate that the information sought cannot be obtained by other means, is relevant and nonprivileged, and is crucial to the preparation of the case. Because the district court did not analyze the Shelton factors, the Court directed the district court to evaluate whether, applying the Shelton factors, Scott Financial may depose Morrill. View "Club Vista Fin. Servs., LLC v. Dist. Court" on Justia Law