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Archive for for March, 2016

When Can I Reasonably Anticipate Being Haled into Court in Another State? (Part I)

March 31, 2016

A recent federal circuit case, Perdue Foods LLC v. BRF S.A., deals with the issue of personal jurisdiction– the power of a court over the parties in the case.[1]  The case involved Perdue Holdings, Inc. (“Perdue”), an international food company based in Maryland, and BRF S.A. (“BRF”), an international food company based in Brazil.  Perdue and BRF were concerned about potential consumer confusion between their similar trademarks, PERDUE and PERDIX, so the two companies entered into an agreement basically to divide the global chicken market into their respective trademark territories. … Read the rest

Delaware law update: Futility of Pre-Suit Demand

March 29, 2016

In our previous blog series on Texas Double-Derivative Shareholder Suit, we touched briefly on the concept of business judgment rule when we discussed a board of directors’ decision to pursue or forgo corporate causes of action in the context of closely held corporations.  In another recent blog post on Tsui v. Chou, we discussed a recent New York appellate court’s decision that held that board decisions were not protected under the business judgment rule because there was no evidence that the board discussed or informed themselves as to those matters.… Read the rest

Corporate Officers’ Trust Fund Tax Responsibility (Part III)

March 24, 2016

In Schiffmann v. United States, on appeal, the court noted that Schiffmann, as CEO and president, had access to the company funds and signing power, and as a director and shareholder, was deeply involved in the day-to-day management of the company, making him a “responsible person.”[1]  His “deep-seated involvement in the financial affairs of the company, including his power over ICOA’s bank accounts and payroll, and his check-signing authority, gave him “’effective power’ to pay the taxes.”[2]  The court found that Schiffmann acted willfully because he was aware of the unpaid trust fund taxes and “did not lift a finger to pay them.”[3]  Similarly, Cummings, as CFO, was a signatory to the company’s principal bank accounts and enjoyed check-signing authority, with a power to decide which outstanding bills to pay, and in what order, making him a “responsible person.”[4]  The court found that Cummings, too, acted willfully because he was aware of the unpaid trust fund taxes and instead paid other bills, such as rent and operational expenses, over the government—despite the expertise he had gained as an IRS field auditor, which should have made him understand the extent of his fiduciary obligation with respect to these liabilities.… Read the rest

SEC Issues an Investor Alert on Social Media and Investing (Part III)

March 22, 2016

SEC v. McKeown.

On June 23, 2010, the Securities and Exchange Commission (“SEC”) filed an emergency action to enjoin Carol McKeown and Daniel F. Ryan, a Montreal-based couple, and their companies from using a website and social media to tout U.S. companies.[1]  According to the SEC, since at least April 1, 2009, Ryan and McKeown owned and operated the website www.PennyStockChaser.com (“PennyStockChaser”), which held itself out as a securities research firm.  The SEC said that, in 2009 alone, Ryan and McKeown used the website to make more than 65 penny stock recommendations, which generally refers to a security issued by a very small company that trades at less than $5 per share and, thus, is considered speculative by nature.… Read the rest

Corporate Officers’ Trust Fund Tax Responsibility (Part II)

March 17, 2016

In Schiffmann v. United States, the IRS, following notice and demand, made trust fund recovery penalty assessments against Schiffmann and Cummings, among others, alleging that, as of March 2014, Schiffmann owed close to $400,000 plus interest for nearly five full quarters beginning April 1, 2005, and Cummings owed more than $250,000 plus interest for nearly three full quarters beginning October 1, 2005.[1]  Schiffmann, after an unsuccessful refund and abatement request, filed suit in the federal district court seeking to recover his seized sums and nullify the assessments.… Read the rest

SEC Issues an Investor Alert on Social Media and Investing (Part II)

March 15, 2016

SEC v. Craig.

On November 5, 2015, the Securities and Exchange Commission (“SEC”) filed securities charges against James Alan Craig, a 62-year-old Scottish trader.[1]  The SEC’s complaint concerns Craig’s use of Twitter accounts to commit securities fraud by making false statements about publicly traded companies in order to manipulate the price of those companies’ exchange-traded securities.  Just as the SEC warned in the investor alert of fraudsters who conceal their true identities by mimicking credible sources of market information, the complaint alleges that Craig created the Twitter accounts to mislead the public into believing that tweets issued from those accounts were from established securities research firms. … Read the rest

Corporate Officers’ Trust Fund Tax Responsibility (Part I)

March 10, 2016

As most employers (and employees) know, the Internal Revenue Service (IRS) requires employers to withhold federal income taxes from employees’ wages and to hold such taxes in trust for the government, often referred to as “trust fund taxes.”[1]  If they are not paid to the government as required, the IRS may look past the corporate form and hold officers of the corporation personally liable under certain circumstances.[2]  Specifically, the Internal Revenue Code provides that “any person required to collect .… Read the rest

New York Law Update: Business Judgment Rule

March 8, 2016

In our previous blog series on Texas Double-Derivative Shareholder Suit, we touched briefly on the concept of business judgment rule when we discussed a board of directors’ decision to pursue or forgo corporate causes of action in the context of closely held corporations in Sneed v. Webre.[1]  While the case we discussed was decided under Texas law, the principles underlying business judgment rule are similar in other jurisdictions: the rule generally presumes that directors or managers, in performing their functions, were honest and well-meaning and that their decisions were informed and rationally undertaken, thereby protecting board decisions from judicial review. … Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.