Justia U.S. D.C. Circuit Court of Appeals Opinion Summaries

Articles Posted in Business Law
by
Plaintiff, who holds the RIOT ACT trademark, entered into a business agreement with defendants to open the Riot Act Comedy Club in downtown D.C. Plaintiff subsequently filed suit to recover damages from defendants' alleged breaches of fiduciary duty and of the operating agreement of the limited liability company the parties formed to start the club. Defendants counterclaimed.The DC Circuit reversed the district court's dismissal of plaintiff's breach of fiduciary duty claim, holding that plaintiff adequately alleged that he and defendants were members of a member-managed LLC and that under D.C. law that suffices to plead the existence of a fiduciary duty. In this case, the district court improperly found it "clear" that a "special confidential relationship transcending an ordinary business transaction did not take place" between the parties. The court explained that the district court failed to consider relevant District of Columbia and Maryland law, the statute's clear imposition of duties of loyalty and care typical of a fiduciary, or the nature of the parties' relationship—as partners and co-managers in a business venture, not merely arms-length parties to a standard commercial transaction. However, plaintiff failed to show that the court should reverse any of the district court's evidentiary rulings. The court affirmed the district court's decision to deny defendants judgment as a matter of law on plaintiff's breach of contract claim and to deny defendants' fee petition. The court remanded for further proceedings. View "Xereas v. Heiss" on Justia Law

by
Cork Wine Bar, a restaurant that competes with President Trump's eponymous hotel, filed suit alleging violations of the District's common law of unfair competition. Cork alleged that President Trump's hotel attracted more of the lobbyists, advocacy groups, and diplomats that Cork had relied on to fill its events calendars, and that these customers chose the hotel because of a perception that patronizing it would be to their advantage in their dealings with the Trump Administration. After removal, the district court denied Cork's motion to remand, dismissing the complaint for failure to state a claim.The DC Circuit held that the case was properly removed based on its two-step analysis in officer-removal cases. First, the court held that President Trump's theory that the District may not impose legal conditions on the lawful performance of his presidential duties was colorable. Second, the court held that President Trump demonstrated that Cork's suit fell within the scope of 28 U.S.C. 1442(a)(1).The court also held that case law did not support Cork's claims on the merits and that Cork failed to cite any contrary precedent. In this case, Cork suggested in passing that President Trump and the hotel were impairing competition and interfering with access to its business. However, the court explained that these claims bear little resemblance to the examples listed in Ray v. Proxmire and B B & W Mgmt., Inc. v. Tasea Inv. Co. Finally, the court declined to certify the core question of District law to the District of Columbia Court of Appeals. View "K&D LLC v. Trump Old Post Office LLC" on Justia Law

by
The DC Circuit affirmed the tax court's judgment that certain partnership currency option transactions lacked economic substance and were shams designed to look like real world trades without any of the risk or concomitant opportunity for profit. The court held that the tax court did not clearly err in concluding that the parties agreed in advance on the exact rates to be used in determining earnings and losses under the option agreements, together with a related evidentiary point. In this case, the parties fixed the forward exchange rates, ensuring that they could predict the precise amount that the winning and losing trades would pay—and ensuring that the trades had no ex ante profit potential and lacked any other legitimate nontax business purposes. The court rejected the partnerships' remaining claims and held that the tax court did not err in any material respect. View "Endeavor Partners Fund, LLC v. Commissioner" on Justia Law

Posted in: Business Law, Tax Law
by
In an action filed by the government to enjoin the vertical merger between AT&T and Time Warner under Section 7 of the Clayton Act, the DC Circuit affirmed the district court's denial of the government's request for a permanent injunction. At issue on appeal was the district court's findings on its increased leverage theory whereby costs for Turner Broadcasting System's content would increase after the merger, principally through threats of long-term "blackouts" during affiliate negotiations.The court held that the government failed to clear the first hurdle in meeting its burden of showing that the proposed merger was likely to increase Turner Broadcasting's bargaining leverage. Furthermore, the government's objections that the district court misunderstood and misapplied economic principles and clearly erred in rejecting the quantitative model were unpersuasive. In this case, the government offered no comparable analysis of data for prior vertical mergers in the industry that showed "no statistically significant effect on content prices" as defendants had. Additionally, the government's expert opinion and modeling predicting such increases failed to take into account Turner Broadcasting System's post-litigation irrevocable offers of no-blackout arbitration agreements, which a government expert acknowledged would require a new model. The court also held that the evidence indicated that the industry had become dynamic in recent years with the emergence of distributors of only on-demand content, such as Netflix and Hulu. View "United States v. AT&T, Inc." on Justia Law

by
Assuming the Foreign Sovereign Immunities Act's immunity applies, the DC Circuit held that it leaves intact the district courts' subject-matter jurisdiction over federal criminal cases involving foreign sovereigns. The court affirmed the district court's order holding the subpoena's target, a corporation owned by a foreign sovereign, in contempt for failure to comply. In this case, the court held that there was a reasonable probability the information sought through the subpoena at issue concerned a commercial activity that caused a direct effect in the United States. The court held that the Act, even where it applies, allows courts to exercise jurisdiction over such activities and the ancillary challenges in this appeal lacked merit. View "In re: Grand Jury Subpoena" on Justia Law

by
This appeal stemmed from an attempt by Starr, a Swiss-domiciled company, to avail itself of a bilateral tax treaty between the United States and Switzerland to reduce its tax rate on U.S.-source dividend income. The DC Circuit reversed the district court's dismissal of Starr's tax refund claim as raising a nonjusticiable political question and remanded for further proceedings. The court explained that the question as to whether the IRS properly found Starr ineligible for treaty benefits under Article 22(6) of the Treaty did not raise a political question.Because Starr could proceed with its tax refund claim, the court held that Starr did not have a cause of action under the Administrative Procedure Act (APA). Rather, the claim was properly brought under 26 U.S.C. 7422. Therefore, the court vacated the district court's decision as to the APA claim and remanded with instructions to dismiss the claim. View "Starr International Co. v. United States" on Justia Law

Posted in: Business Law, Tax Law
by
This case arose when Venezuela and two of its agencies seized all assets of an American drilling company's Venezuelan subsidiary. Both parent and subsidiary filed suit claiming that the expropriation of the subsidiary's business and assets without compensation violated international law.On remand from the Supreme Court, at issue was whether either company had alleged facts that were sufficient, if true, to establish that it had in fact suffered a taking in violation of international law. The DC Circuit held that only the American parent, not its Venezuelan subsidiary, had done so. The court held that the domestic-takings rule barred the subsidiary's expropriation claim where the subsidiary was considered a Venezuelan national under international law. In this case, the subsidiary was incorporated in Venezuela and had a legal identity distinct from that of its parent shareholders under local law. The court further held that, given the subsidiary's Venezuelan nationality, its takings claim against Venezuela was a matter of domestic, not international, law under the domestic-takings rule. Therefore, the court affirmed the district court's dismissal of the subsidiary's claims, as well as the denial of defendants' motion to dismiss the parent's claims. View "Helmerich & Payne International Drilling Co. v. Bolivarian Republic of Venezuela" on Justia Law

by
After the IRS refused to grant the foreign shipping corporation Good Fortune an exemption to some of its U.S.-based income from taxation, the tax court ruled in favor of the IRS. The DC Circuit reversed, holding that the IRS's interpretation of Internal Revenue Code 883 in the 2003 Regulation was unreasonable and could not stand. Even if the IRS reasonably concluded that sometimes—maybe oftentimes—bearer shares were incapable of proving the residence of their owners, the court held that the 2003 Regulation's categorical bar on considering bearer shares did not follow from that premise. The court explained that the IRS has not justified treating all bearer shares as incapable of proving ownership; and if some corporations' bearer shares were not kept in record form, and thus were not capable of proving the location of an owner, then the IRS should have identified those corporations' shares and tailored its rule accordingly. View "Good Fortune Shipping SA v. Commissioner" on Justia Law

by
The DC Circuit affirmed the Tax Court's holding that Mellow was subject to the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), 26 U.S.C. 6221–6234 (2012), proceedings. The court held that the record made clear that Mellow's partners were the single-member LLCs, not their individual owners; the court deferred to the IRS's reasonable interpretation of its own regulation that a partnership with pass-thru partners was ineligible for the small-partnership exception and that single-member LLCs constitute pass-thru partners; and the court lacked jurisdiction over Mellow's challenge to the penalties because Mellow failed to raise its claim and waived its claim by consenting to a decision applying penalties. View "Mellow Partners v. Commissioner of Internal Revenue Service" on Justia Law

Posted in: Business Law, Tax Law
by
The right of public access is a fundamental element of the rule of law, important to maintaining the integrity and legitimacy of an independent Judicial Branch. The Dodd-Frank Act does not abrogate the common-law right of public access to judicial records. The D.C. Circuit held that there is nothing in the language of Dodd-Frank to suggest that Congress intended to displace the long-standing balancing test that courts apply when ruling on motions to seal or unseal judicial records. Therefore, the court vacated and remanded because the district court did not apply that test to the motion to unseal the records at issue here, but instead ruled that they were categorically exempt from disclosure. View "MetLife, Inc. v. Financial Stability Oversight Council" on Justia Law

Posted in: Business Law