Lubin_FB_1-large-300x115A railroad switch carrier sued a railroad operator alleging that the operator took advantage of its position as a majority shareholder in a joint venture to force the joint venture company to agree to a contract with atrocious and unfair terms. The switch carrier alleged that the contract forced the joint venture company to pay 3.5x the fair market value of rent for use of railroad tracks, as well as turn over its assets to the railroad operator. The plaintiff sued, but the district court found that the company’s claims were preempted by federal statutes. On appeal, the 7th Circuit found that the plaintiff had failed to develop several of the arguments that it advanced in the district court. The appellate panel found that there was no excuse for this error because the plaintiff and defendant were both sophisticated litigants. The panel determined that the plaintiff had waived its arguments as a result.

Canadian Pacific Railway owns 49% of Indiana Harbor Belt Railroad Company while Consolidated Rail Corporation owns 51%. Two other defendants, Norfolk Southern Corporation and CSX Corporation, indirectly own Consolidated Rail. Norfolk Southern and CSX each control two directors on Indiana Harbor’s seven-person board. Indiana Harbor operates as a switch carrier on tracks owned by Consolidated Rail and its parent companies near Chicago.

The railroads managed their arrangement with a 99-year contract executed in 1906 between Indiana Harbor and the previous owners of the tracks. Though the agreement expired in 2006, for seven years between 1999 and 2006, Consolidated Rail stopped paying expenses and invoicing Indiana Harbor for rent. This quid pro quo cessation lasted through the expiration of the agreement and into the extended negotiations over a new trackage rights contract. Continue reading ›

The COVID-19 pandemic has disrupted all kinds of businesses all over the world, but small businesses have been hit the hardest. Many business owners pay for business insurance to help them cover the costs of doing business when they can’t do business, or to cover the costs of litigation if they get sued.

But this pandemic has put so many small businesses out of business, even if just temporarily, those insurers have been flooded with claims – and when insurers get flooded with claims, they usually look for excuses to avoid paying all those claims.

Hiscox is a major insurance company that specializes in selling business insurance to small business owners, often directly over the internet without the aid of an insurance broker. When many of those policyholders tried to file claims with Hiscox for business disruption, Hiscox allegedly claimed the pandemic is not covered under the terms of their business disruption insurance policy.

In response to the insurance company’s refusal to pay up, almost 350 policyholders came together to form the Hiscox Action Group. Mishcon de Reya, a law firm based in London, has been hired to represent Hiscox Action Group and they quickly entered into arbitration against Hiscox over the unpaid business disruption insurance claims.

Hiscox is not the only insurance company refusing to pay small business owners for the losses they have suffered as a result of COVID-19. Seven other insurance companies, along with Hiscox, are taking part in a UK court test case to determine whether insurers can be made to pay business disruption claims in the wake of COVID-19. Continue reading ›

Back in January of 2012, the City of Westland Police and Fire Retirement System filed a class-action lawsuit against MetLife Inc. They alleged that the insurance company used data from the Social Security Administration’s “Death Master File” (DMF) to determine when to stop paying annuities to deceased policyholders, but allegedly did not use the same database to determine when to pay out life insurance policies or the Retained Asset Account, although it could have easily done so.

The insurance company also allegedly failed to include data from the DMF regarding its pending payouts in its quarterly reports to its shareholders, thereby underreporting to its investors the amount of money it would have to pay out to policyholders and overestimating its quarterly profits. This withholding of information made MetLife’s investors think the company had less money in outgoing payouts than it actually had, which allegedly resulted in MetLife maintaining stock prices that were artificially high – as soon as the information was made public, the insurance company’s stock prices allegedly dropped and the plaintiffs of the lawsuit allege they suffered financial damages.

Despite the fact that regulators had looked into the insurance company’s alleged misuse (or at least misreporting) of the data contained in the DMF, MetLife also allegedly failed to disclose to its shareholders the fact that regulators were investigating the insurance company’s misuse of the DMF. Continue reading ›

MG_6325_1-300x200The FTC sued a student loan debt relief company that promised consumers that it would reduce their monthly student loan payments, or arrange for their student debts to be forgiven in whole or part by their student loan servicers. Instead, the company kept most of the money sent to them by the consumers and failed to negotiate with the servicers or remit the payments in a timely fashion. The district court granted summary judgment to the FTC and issued a permanent injunction against the defendants, as well as a monetary judgment for more than $27 million in restitution.

The United States District Court for the Central District of California granted summary judgment to the Federal Trade Commission in a suit filed against Elegant Solutions, Inc. The FTC filed a complaint against Elegant Solutions for a permanent injunction and other equitable relief pursuant to § 13(b) and 19 of the Federal Trade Commission Act and 57(b) of the Telemarketing and Consumer Fraud and Abuse Prevention Act.

The FTC’s complaint charged that the defendants participated in acts or practices that violated § 5(a) of the FTC Act by representing in advertising that consumers who purchased the defendants’ debt relief services would be enrolled in a repayment plan that would reduce their monthly payments on their student loans to a lower, specific amount, or have their student loan balances forgiven in whole or part; that most or all of the consumers’ monthly payments to the defendants would be applied toward consumers’ student loans; and that the defendants would assume responsibility for the servicing of consumers’ student loans. The district court found that, in numerous instances in which the defendants made such representations, they were false or not substantiated. The panel determined that these representations constituted a deceptive act or practice in violation of § 5(a) of the FTC Act. Continue reading ›

Gary Ganzi and his sister, Claire Ganzi Breen, sued their cousins back in 2012 for allegedly cheating them out of millions of dollars in royalties over the course of more than 40 years. A state court judge in Manhattan sided with the Ganzi siblings, saying the actions of the defendants, Walter Ganzi Jr. and Bruce Bozzi Jr., constituted a breach of fiduciary duty in which they prioritized their own financial wellbeing above the responsibility they bore their shareholders.

The defendants are the grandsons of the original founders of the iconic Palm steakhouse, and together they own a controlling share of the company, Just One More Restaurant Corp., which owns the chain of restaurants. They have opened more than 20 Palm restaurants across the U.S. and have licensed intellectual property related to the restaurant, including the right to use the name, logo, and the look and feel of the original Palm. The Ganzi siblings own all that intellectual property and the defendants allegedly licensed that property from them every time they opened a new Palm restaurant.

The price of licensing that intellectual property was set at a flat rate more than four decades ago, and as a result, the Ganzi siblings have been paid $6,000 in licensing fees for every new Palm restaurant that opens, but they claim that it’s worth much more. Continue reading ›

Although e-cigarettes were first marketed as a way for smokers to quit smoking, not only has it been proven that they are not an effective way to quit smoking, but e-cigarette companies, like Juul, have actually gotten young people addicted to nicotine by targeting teens and young adults who had not previously been smokers.

Despite the fact that vaping has been marketed as a safe alternative to smoking, the reality is that it has contributed to thousands of cases of lung cancer. In addition to nicotine, many e-cigarettes also contain THC, which is a psychoactive ingredient.

Dr. Ngozi Ezik, the Director of the Illinois Department of Public Health, has reported that 201 cases of lung illnesses in Illinois alone have been confirmed as vaping-related illnesses. The youngest patient was just 13 years old. Five deaths in Illinois have been linked to vaping.

Juul is the most popular e-cigarette company by far, and it is now facing a consumer fraud lawsuit by the state of Illinois for having targeted teens. Among other things, the lawsuit alleges Juul has been instrumental in undoing decades of work by both government agencies and anti-tobacco activists towards reducing smoking rates among teens. Despite the initial success of those efforts, which saw teen use of nicotine drop from 36% in 1997 to 5% in 2017, new data shows that the use of e-cigarettes among both teens and middle school students is currently on the rise. Continue reading ›

Hudson’s Bay (HBC), the Canadian retail company that owns Saks, among other high-end stores, has been sued by lenders who claim the reorganization of the company that happened earlier this year was conducted in an attempt to set up a secret corporate shell game that has robbed the credit that exists as insurance on the $850 million loan the plaintiffs have invested in the company.

The lawsuit centers around the fact that, as the owner of stores like Saks and Lord & Taylor, HBC was responsible for guaranteeing payment on all loans for the stores, including making sure the rent was paid if the stores themselves were in financial distress or unable to make rent for any other reason.

Earlier this year, HBC formed a new Bermuda corporation, which is owned by shareholders with a controlling interest in HBC, as well as executives at the highest levels of HBC’s corporate hierarchy. According to the plaintiff, Situs Holdings, this transfer of assets is not only improper but also violates the loan agreement and puts at risk the company’s ability to repay the loan.

HBC denies all the allegations, claiming the restructuring amounted to little more than a change in name and some paper shuffling. It also alleges that Situs never had any claim on the assets of HBC that were reassigned in the course of the restructuring process. The Canadian retail company insists that Situs’s reaction to the restructuring is far beyond what the restructuring actually accomplishes and that the plaintiff’s claims that HBC allegedly conducted this restructuring in secret, deliberately keeping it concealed from Situs, are likewise false. Continue reading ›

If someone is accused of defrauding investors in one city, does that mean that person can’t do business with another company in another city? Especially before the allegations of fraud have been determined by a court of law?

That’s the question James “Woody” Dillard’s attorneys and business partners are asking as investors who were allegedly defrauded by Dillard try to claim potential vendors for Dillard and his business partners should have all their facts in order before signing on the dotted line.

Dillard has recently partnered with Streamline Boats of Hialeah, Florida, which makes semi-custom fishing boats. Although the company is only a couple years old, it has already changed locations several times and is currently looking to sign a lease for warehouse space at the Port of Pensacola. The city of Pensacola has put the lease on hold while they investigate.

Specifically, the city is worried about styrene, a foul-smelling by-product from working with fiberglass, which is a prominent material used to make all kinds of boats these days. Having made strides in reducing their emissions and their impact on the environment, the city is concerned that having a boat manufacturer in their warehouse district will undo much of the work they’ve done towards making and maintaining a more eco-friendly city.

Sanchez, one of the managers of Streamline Boats, claims they use very little styrene in the production of their boats, and that they invest heavily in the warehouse space they use to make sure they don’t stink it up. Essentially, they strive to become ideal tenants.

But two investors who invested in another of Dillard’s business ventures claim emissions should be the least of the city’s concerns when deciding whether to approve the lease. Continue reading ›

Last fall, Alden Shoe Co. realized its CFO had allegedly been embezzling millions of corporate funds and transferring them to his own, personal accounts. More than half of what he allegedly stole from the shoe company he is claimed to have used to pay for gifts he gave to Bianca de la Garza, including a car, diamond jewelry, designer clothes and handbags, and investing in her production company, Lucky Gal Productions.

Unfortunately, Lucky Gal Productions according to news reports has never turned a profit in the six years since it was founded, making it unlikely the former CFO will ever see a return on his investment.

Richard Hajjar was hired by the shoe company back in 1987. His two brothers already worked for the company and his father had been the CPA for Arthur S. Tarlow Jr., Alden’s current president. No one questioned Hajjar’s loyalty until last fall when Tarlow realized Hajjar had allegedly been moving funds from the company’s bank account into family trusts. When he approached Hajjar about it, Hajjar allegedly dodged the question but assured Tarlow the funds would be transferred back into the company’s bank account.

Hajjar then according to news reports stopped showing up for working, texting Tarlow to say he wasn’t feeling well. When the funds didn’t show up in the bank account, Hajjar allegedly stopped responding to Tarlow’s text messages, and Tarlow went to his Santander bank branch, where the shoe company had accounts. Tarlow then discovered that $10 million in retained earnings was allegedly missing from the account. Continue reading ›

E-commerce and tech behemoth, Amazon, has filed a lawsuit against the former vice president of marketing for its Amazon Web Services division, Brian Hall, alleging that his new role at Google Cloud violates the terms of his non-compete agreement. In its complaint, Amazon alleges that Hall’s employment with Google threatens to cause irreparable harm and risks exposing valuable competitive information to one of its biggest rivals. Amazon seeks both money damages and injunctive relief, requesting that the court enjoin Hall from working for Google for the remainder of the 18-month non-compete period set forth in the agreement.

This lawsuit is the latest in a series of lawsuits filed by Amazon to enforce non-compete clauses in employment contracts. In 2017, Amazon sued another former vice president who left Amazon Web Services to take a job with a Seattle-area software company but dropped the suit shortly after filing it. In 2019, Amazon filed a similar suit against a former Amazon Web Services sales executive after he too left the company to take a job with Google Cloud. A judge ultimately agreed to partially limit certain aspects of that employee’s role at Google but did strike down certain portions of the restrictive covenant as “unreasonable” and took Amazon to task for taking a one-size-fits-all approach to its non-compete agreement. This latest lawsuit comes after Washington state enacted a new law last year that severely restricted the use of non-compete agreements within the state. We previously wrote about that new law here. Continue reading ›

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