Articles Posted in Corporate Compliance

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"The Record in this case is voluminous, and illustrates the complex and, at times, contentious nature of these proceedings. The circuit judge presided over numerous motion hearings and issued numerous orders over the course of this litigation." However, this appeal concerned a final order in which the circuit judge dismissed all of the cases and awarded fees and costs to Respondents as sanctions for Appellants' continued refusal to comply with his previous discovery rulings. In addition, Appellants appealed the judge's failure to disqualify himself at the outset of this litigation and late refusal to recuse himself. Appellants were limited partners in five separate limited partnerships and asserted legal claims in five separate actions against Respondents, their general partners. The limited partnerships were formed in the 1960s to construct and operate the properties at issue, affordable housing projects for low-income citizens in three counties. Respondents became general partners around 1975, and from that point forward, Appellants took no part in the management or business affairs of the complexes. In 1984, Respondents notified Appellants that they had contracted to sell the properties to Boston Financial Group (BFG). The terms of the sale called for a small amount to be paid upfront but the majority would be paid in 1999 in a "balloon" payment with accruing interest. However, BFG defaulted on the payment, and sold the properties without intervention from the partnerships. All of the claims stemmed from Respondents' roles in selling the properties and their actions in the aftermath of BFG's default. Appellants argued on appeal the Supreme Court that the circuit abused its discretion by dismissing these cases under the facts, particularly because" (1) less "draconian" punishments were available to the court; (2) Appellants agreed to receive a less harsh sanction and "took extraordinary steps to avoid dismissal"; (3) the judge consistently espoused Respondents' arguments as evidence constituting a factual basis to support his decisions; and (4) the judge deviated from South Carolina law to effect dismissal. The Supreme Court affirmed the circuit court in all respects: the circuit court did not abuse its discretion in the rulings it made, and Appellants failed to prove that they suffered any prejudice as a result of the judge's refusal to recuse himself in this case. The case was remanded for further proceedings. View "Davis v. Parkview Apartments" on Justia Law

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Petitioner Brian Menezes served as the chief financial officer and interim chief executive officer of Safety Components International, Incorporated (SCI), from 1999 until 2006. SCI was a publicly traded Delaware company with its headquarters and principal place of business located in Greenville, South Carolina. In June 2006, SCI terminated Petitioner. Petitioner sued SCI, alleging, among other things, breach of contract and violation of the South Carolina Payment of Wages Act. A short time after his termination, Petitioner exercised his stock options and became an SCI shareholder. The SCI board of directors entered into merger negotiations with the former International Textile Group (FITG). WL Ross & Company, LLC (Respondents), controlled both SCI and FITG. The SCI Board publicly announced the terms of the merger on August 30, 2006, with the filing of a Form 8-K with the Securities and Exchange Commission (SEC). On September 1, 2006, the SCI Board filed a Joint Proxy Statement/Prospectus (Form S-4) with the SEC. It was clear from the Form S-4, that due to Respondent's ownership role in SCI and FITG, the planned procedures at the 2006 Annual Meeting were a formality. Petitioner argued that Respondents breached their fiduciary duty to SCI's shareholders by approving merger terms which were unfair to SCI shareholders, failing to conduct due diligence regarding the financial condition of FITG, and failing to protect SCI's minority shareholders. On appeal to the Supreme Court, Petitioner argued that the court of appeals erred in its analysis of when a claim for breach of fiduciary duty accrued under Delaware law. The Supreme Court disagreed: "The court of appeals performed a knowledgeable and perceptive analysis of the instant case. However, our review of Delaware law leads us to a different conclusion regarding the efficacy of Petitioner's claim. Thus, we affirm the court of appeals' decision in part, reverse in part, and remand for further proceedings consistent with this opinion." View "Menezes v. WL Ross & Company" on Justia Law