Articles Posted in Business Law

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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

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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

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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

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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

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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

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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

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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

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Rothe filed suit alleging that the statutory basis of the Small Business Administration’s (SBA) 8(a) business development program, Amendments to the Small Business Act, 15 U.S.C. 637, violates its right to equal protection under the Due Process Clause of the Fifth Amendment. Rothe is a small business that bids on Defense Department contracts, including the types of subcontracts that the SBA awards to economically and socially disadvantaged businesses through the 8(a) program. The court rejected Rothe's claim that the statute contains an unconstitutional racial classification that prevents Rothe from competing for Department of Defense contracts on an equal footing with minority-owned businesses. The court concluded that the provisions of the Small Business Act that Rothe challenges do not on their face classify individuals by race. In contrast to the statute, the SBA’s regulation implementing the 8(a) program does contain a racial classification in the form of a presumption that an individual who is a member of one of five designated racial groups (and within them, 37 subgroups) is socially disadvantaged. Because the statute lacks a racial classification, and because Rothe has not alleged that the statute is otherwise subject to strict scrutiny, the court applied rational-basis review. Under rational-basis review, the court concluded that the statutory scheme is rationally related to the legitimate, and in some instances compelling, interest of counteracting discrimination. Finally, Rothe's evidentiary and nondelegation challenges failed. Accordingly, the court affirmed the district court's judgment granting summary judgment to the SBA and DOD. View "Rothe Development v. DOD" on Justia Law

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The Government sought to recover a $1.3 million judgment debt pursuant to the Federal Debt Collect Procedures Act (FDCPA), 28 U.S.C. 3001 et seq., by garnishing funds owed to WDG, a company T. Conrad Monts and his wife owned as tenants by the entireties. The court reversed the district court's holding that Monts had a sufficient property interest in WDG’s assets to permit garnishing them under the FDCPA in satisfaction of his debts. The court remanded for the district court to evaluate the Government’s alternative argument that it may garnish WDG’s assets by piercing the corporate veil between WDG and Monts. View "United States v. TDC Mgmt. Corp." on Justia Law

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Plaintiff, a real estate developer, alleged that WMATA signed a contractually binding Term Sheet preliminarily selecting plaintiff to develop property above a Metrorail station and giving plaintiff the exclusive right to negotiate a final development agreement. Plaintiff filed suit raising claims related to its allegation that one of WMATA's Board Members, Jim Graham, abused his position and his seat on the Council of the District of Columbia to work behind the scenes with one of plaintiff’s rival bidders to derail WMATA's negotiations with plaintiff. The court concluded that plaintiff adequately stated both contract claims for breach of the exclusivity provision and breach of the implied covenant of good faith and fair dealing. Further, plaintiff adequately stated its claim of tortious interference and conspiracy against plaintiff's rival bidder. The court reversed as to these claims. The court affirmed the district court’s dismissal of plaintiff’s claim for fraud against WMATA because it is barred by sovereign immunity. The court held that Graham failed to bear his burden to establish the scope of his official duties and to situate his conduct within its outer perimeter. Therefore, the court vacated the district court’s dismissal and remanded for the district court to consider in the first instance which of Graham’s other actions fell beyond the outer perimeter of his official duties and whether those actions that did fall beyond the outer perimeter, taken together, state claims against Graham for tortious interference and civil conspiracy. The court vacated the district court’s dismissal of plaintiff's claims against Graham and remanded for further consideration. View "Banneker Ventures, LLC v. Graham" on Justia Law

Posted in: Business Law, Contracts