Justia U.S. 10th Circuit Court of Appeals Opinion Summaries

Articles Posted in Business Law
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In 2015, the Government filed a civil action against Neldon Johnson, Gregory Shepard, and Johnson’s three companies: RaPower-3 LLC (“RaPower”), International Automated Systems, Inc. (“IAS”), and LTB1, LLC (“LTB”) (collectively, Defendants). The Government alleged Defendants promoted an abusive tax scheme. Following a bench trial, the district court found for the Government, enjoined the Defendants from further promoting their scheme, and ordered disgorgement of ill-gotten gains. In 2018, the district court appointed a receiver (Appellee) to take control of Defendants' assets and to investigate whether their affiliated entities possessed proceeds from the illicit tax scheme. On the Receiver’s recommendation, the court added 13 nonparty affiliated entities to the Receivership. Six of the added entities (“Appellant Entities”) appeals, arguing the district court included them in the Receivership without providing sufficient due process. Finding the "Receivership Expansion Order" was not immediately appealable because the Appellant Entities did not show the order was final, the Tenth Circuit dismissed the appeal for lack of jurisdiction. View "United States v. RaPower-3" on Justia Law

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After a bench trial, a district court decided that Defendants RaPower-3, LLC, International Automated Systems, Inc. (IAS), LTB1, LLC, Neldon Johnson, and R. Gregory Shepard had promoted an unlawful tax scheme. Defendants’ scheme was based on a supposed project to utilize a purportedly new, commercially viable way of converting solar radiation into electricity. There was no “third party verification of any of Johnson’s designs.” Nor did he have any “record that his system ha[d] produced energy,” and “[t]here [were] no witnesses to his production of a useful product from solar energy,” a fact that he attributed to his decision to do his testing “on the weekends when no one was around because he didn’t want people to see what he was doing.” Defendants never secured a purchase agreement for the sale of electricity to an end user. The district court found that Johnson’s purported solar energy technology was not a commercial-grade solar energy system that converts sunlight into electrical power or other useful energy. Despite this, Defendants’ project generated tens of millions of dollars between 2005 and 2018. Beginning in 2006, buyers would purchase lenses from IAS or RaPower-3 for a down payment of about one-third of the purchase price. The entity would “finance” the remaining two-thirds of the purchase price with a zero- or nominal- interest, nonrecourse loan. No further payments would be due from the customer until the system had been generating revenue from electricity sales for five years. The customer would agree to lease the lens back to LTB1 for installation at a “Power Plant”; but LTB1 would not be obligated to make any rental payments until the system had begun generating revenue. The district court found that each plastic sheet for the lenses was sold to Defendants for between $52 and $70, yet the purchase price of a lens was between $3,500 and $30,000. Although Defendants sold between 45,000 and 50,000 lenses, fewer than 5% of them were ever installed. Customers were told that buying a lens would have very favorable income-tax consequences. Johnson and Shepard sold the lenses by advertising that customers could “zero out” federal income-tax liability by taking advantage of depreciation deductions and solar-energy tax credits. To remedy Defendants' misconduct, the district court enjoined Defendants from continuing to promote their scheme and ordered disgorgement of their gross receipts from the scheme. Defendants appealed. Finding no reversible error, the Tenth Circuit affirmed the district court. View "United States v. RaPower-3" on Justia Law

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The Town of Castle Rock, Colorado enacted a 7:00 p.m. curfew on commercial door-to-door solicitation. Aptive Environmental, LLC sold pest-control services through door-to-door solicitation and encouraged its salespeople to go door-to-door until dusk during the traditional business week. When Aptive came to Castle Rock in 2017, it struggled to sell its services as successfully as it had in other nearby markets. Blaming the Curfew, Aptive sued Castle Rock for violating its First Amendment rights and sought an injunction against the Curfew’s enforcement. After a bench trial, the district court permanently enjoined Castle Rock from enforcing the Curfew. Castle Rock appealed. After review, the Tenth Circuit concluded Castle Rock failed to demonstrate the Curfew advanced its substantial interests in a direct and material way. View "Aptive Environmental v. Town of Castle Rock" on Justia Law

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A federal district court used a Colorado statute governing costs to award more than $230,000 in costs that would not have been allowable under Federal Rule of Civil Procedure 54(d). Disappointed with the outcome of a merger, minority-shareholder Plaintiffs brought a class action against Defendants for breach of contract and fiduciary duties. The parties litigated their dispute for over ten years across proceedings in arbitration and federal court. In the end the district court granted summary judgment in Defendants’ favor, which was affirmed by the Tenth Circuit. Moving for costs under Rule 54(d), the district court awarded the costs under review in this appeal. Because Rule 54(d) fell well within the statutory authorization of the Rules Enabling Act and its displacement of Colorado state law would not impair any state substantive right, the Tenth Circuit held that a federal court exercising diversity jurisdiction has no power to award costs. View "Stender v. Archstone-Smith" on Justia Law

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Defendants-Appellants Paragon Contractors Corporation and Brian Jessop (Paragon) appealed a district court’s order, findings of fact and conclusions of law regarding the calculation of back wages. Plaintiff-Appellee United States Secretary of Labor (Secretary) sought to compel Paragon to replenish a fund established to compensate children employed without pay in violation of both the Fair Labor Standards Act (FLSA) and an injunction. Paragon had previously been held in contempt for violating the injunction. On appeal, Paragon contended the district court failed to adhere to the elements of a back wage reconstruction case under Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946). Specifically, Paragon argued the district court erred in: (1) concluding that the Secretary established a prima facie case; (2) imposing an improperly high burden for rebutting the inferences arising from that case and holding that Paragon failed to rebut certain inferences; and (3) declining to apply a statutory exemption. Finding no reversible error, the Tenth Circuit affirmed. View "Scalia v. Paragon Contractors" on Justia Law

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Plaintiff XMission, L.C. appealed a district court's dismissal of its claims against Fluent, LLC for lack of personal jurisdiction over Fluent in Utah. Fluent was a Delaware limited liability company with its principal place of business in New York. It described its service as digital marketing; its business model was apparently based on supplying consumer data to businesses. XMission was a Utah limited liability company with its principal place of business in Salt Lake City. As an internet service provider (ISP), it used servers and other hardware that it owned and operated in Utah to provide internet access for its commercial and residential customers. It also provided email hosting and other internet-related services. Any email sent to a domain hosted by XMission would arrive on XMission’s email servers in Utah. XMission’s complaint against Fluent was based on more than 10,000 emails sent from 2015 to early 2018 to more than 1,100 XMission customers in Utah through its servers, allegedly in violation of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act). The emails at issue instructed recipients to follow links that offered to rewards. By clicking the link, the recipient is taken to a Fluent-controlled data-gathering domain that prompts the recipient to enter personal information such as name, age and date of birth, gender, email address, social media activity, zip code, and street address. Fluent apparently collects and aggregates the consumer information and sells this personal data to others to assist them in developing targeted marketing campaigns. The record does not disclose whether the email recipients actually obtain any rewards from the named companies or whether Fluent is compensated in any way by those companies for these emails. After review, the Tenth Circuit remained unpersuaded the offending emails created personal jurisdiction over Fluent in Utah, and thus affirmed the district court's dismissal. View "XMission, L.C. v. Fluent, LLC" on Justia Law

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The IRS conducted a civil audit of Peter Hermes, Kevin Desilet, Samantha Murphy, and John Murphy (collectively, the “Taxpayers”) to verify their tax liabilities for their medical- marijuana dispensary, Standing Akimbo, LLC. The IRS was investigating whether the Taxpayers had taken improper deductions for business expenses arising from a “trade or business” that “consists of trafficking in controlled substances.” Claiming to fear criminal prosecution, the Taxpayers declined to provide the audit information to the IRS. This left the IRS to seek the information elsewhere—it issued four summonses for plant reports, gross-sales reports and license information to the Colorado Department of Revenue’s Marijuana Enforcement Division (the “Enforcement Division”), which is the state entity responsible for regulating licensed marijuana sales. In Colorado federal district court, the Taxpayers filed a petition to quash the summonses. The government moved to dismiss the petition and to enforce the summonses. The district court granted the motion to dismiss and ordered the summonses enforced. After review, the Tenth Circuit concluded the Taxpayers failed to overcome the IRS' showing of good faith, and failed to establish that enforcing the summonses would constitute an abuse of process. View "Standing Akimbo, LLC v. United States" on Justia Law

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Plaintiff, Steve Strauss, brought claims against Defendant, Angie’s List, Inc., alleging violations of the Lanham Act. Strauss owned a tree trimming/removal business called Classic Tree Care (“Classic”). Defendant Angie’s List was an internet-based consumer ratings forum on which fee-paying members could view and share reviews of local businesses. According to Strauss, the membership agreement between Angie’s List and its members lead members to believe that businesses were ranked by Angie’s List according to unedited consumer commentaries and endorsements when, in reality, the order in which businesses were ranked was actually based on the amount of advertising the business bought from Angie’s List. He alleged businesses were told they will be ranked more favorably on the website if they paid advertising and referral fees to Angie’s List. According to Strauss, from 2005 to 2016 he paid $200,000 in advertising services fees and coupon retention percentages to Angie’s List “in an effort to appear higher” in search results. The business relationship between Strauss and Angie’s List, however, began to sour in 2013. Strauss alleged he failed to appear in search results for a three-month period and then was “buried” in search-result listings even though he had numerous favorable reviews and a high rating from consumers. In September 2017, Strauss filed a putative class action lawsuit against Angie’s List, raising allegations that Angie’s List engaged in false advertising in violation of section 45(a) of the Lanham Act, as well as the Kansas Consumer Protection Act (KCPA). Strauss appealed when the district court dismissed his complaint on the basis that it failed to identify any statements made by Angie’s List that qualified as commercial advertising or promotion within the meaning of the Lanham Act’s false advertising provision. Strauss contended the district court erred by analyzing his claims under the test adopted by the Tenth Circuit in Proctor & Gamble Co. v. Haugen, 222 F.3d 1262 (10th Cir. 2000) (adopting a four-part test for determining what constitutes commercial advertising or promotion). Finding no reversible error, however, the Tenth Circuit affirmed dismissal of Strauss’ case. View "Strauss v. Angie's List" on Justia Law

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After John Worthen amassed over eighteen million dollars in unpaid tax liabilities, the federal government placed liens on properties it claimed belonged to his alter egos or nominees. Following a court- ordered sale of the properties, Worthen sought to exercise a statutory right to redeem under Utah state law. The district court concluded there were no redemption rights following sales under 26 U.S.C. 7403. The Tenth Circuit concurred, finding neither section 7403 nor 28 U.S.C. 2001, which governed the sale of realty under court order, explicitly provided for redemption rights. Moreover, federal tax proceedings provided sufficient protection for taxpayers and third parties. View "Arlin Geophysical Company v. United States" on Justia Law

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At issue in this case was whether a federal court sitting in Oklahoma had specific jurisdiction over Dr. Scott Jolly, a dentist and Arkansas resident, and his Limited Liability practice, Jolly Dental Group, LLC. Dental Dynamics, LLC argued that three isolated business transactions and an allegedly fraudulent contract were sufficient to establish federal court jurisdiction over its breach of contract and fraud claims. The Tenth Circuit disagreed, finding Jolly Dental's contacts with Oklahoma were "too random, fortuitous, and attenuated" to establish personal jurisdiction there. With respect to Denta; Dynamics' fraud claim, the Court concluded Dental Dynamics failed to show conduct sufficiently targeted to Oklahoma to establish personal jurisdiction there. View "Dental Dynamics v. Jolly Dental Group" on Justia Law