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

Plaintiffs appealed the district court’s dismissal of a securities class action against ZAGG, Inc. and its former CEO and Chairman, Robert Pedersen, alleging violations of the antifraud provisions of the securities laws. The plaintiffs alleged Pedersen failed to disclose in several of ZAGG’s SEC filings the fact that he had pledged nearly half of his ZAGG shares (or approximately 9 percent of the company), as collateral in a margin account. The district court dismissed the complaint for a failure to plead particularized facts giving rise to a strong inference that Pedersen acted with an intent to defraud as required by the Private Securities Litigation Reform Act of 1995 (PSLRA). The Tenth Circuit found that the PSLRA subjected plaintiffs to a heightened pleading requirement of alleging intent to defraud with particularized facts that give rise to an inference that is at least as cogent as any competing, nonculpable explanations for a defendant’s conduct. After review, the Tenth Circuit agreed with the district court that the plaintiffs did not meet that standard here. View "Swabb v. ZAGG, Inc." on Justia Law

In April 2013, plaintiffs filed a complaint in Utah state court seeking declaratory and injunctive relief. The complaint sought a declaration as to the authority of the Ute Indian Tribe of the Uintah and Ouray Reservation (the "Tribe") over non-Indian businesses operating on certain categories of land. It also alleged that Dino Cesspooch, Jackie LaRose, and Sheila Wopsock (individuals affiliated with the Ute Tribal Employment Rights Office ("UTERO")), had harassed and extorted plaintiffs in violation of state law. Defendants filed a motion to dismiss in state court by way of a special appearance, arguing that service of process had been insufficient, that the state court lacked subject matter jurisdiction in the absence of a valid waiver of tribal sovereign immunity, that the Tribe and its officers were immune from suit but were necessary and indispensable parties, and that plaintiffs failed to exhaust administrative remedies in tribal court. Cesspooch and LaRose were properly served. Two attorneys for the defendants moved for pro hac vice admissions. The motions were granted. Following a hearing on the motion to dismiss, the state court ordered further briefing on whether defendants' motion constituted a general appearance and authorized substituted service on the Tribe and Wopsock. The court then granted plaintiffs' motion to file an amended complaint adding additional defendants. The Tribe, Cesspooch, LaRose, and Wopsock were served the amended complaint. The Tribe filed a notice of removal in the U.S. District Court for the District of Utah. In its notice, the Tribe stated that Cesspooch, LaRose, and Wopsock consented to removal, and that the remaining defendants would consent. The remaining defendants (save one) filed consent and joinders to removal. Plaintiffs moved to remand, arguing that the initial defendants waived their right to removal (or to consent to removal) by litigating in state court, removal was untimely, the defendants had not unanimously consented to removal, and that the federal court lacked subject matter jurisdiction. The district court granted the motion to remand. The Tribe appealed the remand order. The Tenth Circuit dismissed this appeal, finding that under 28 U.S.C. 1447(d), a district court order remanding a case to state court was "not reviewable on appeal or otherwise." Further, the Court held that a district court order remanding because the defendants did not unanimously join or consent to removal was patently "not reviewable." In addition, the Court concluded that the remand order in this case was colorably characterized as being based on lack of unanimity. View "Harvey v. Ute Indian Tribe" on Justia Law

Cox Enterprises was the defendant in a class-action antitrust suit. Shortly before trial was set to begin, Cox moved to arbitration. Cox' request came after considerable discovery, potentially dispositive motions, and a petition to the Tenth Circuit. The district court determined that Cox’s assertion of its right to arbitrate was "overly late" and inconsistent with its conduct in litigating the case, and thus held that Cox had waived its right to compel arbitration. After applying the six factors outlined by the Tenth Circuit in "Peterson v. Shearson/Am. Express, Inc.," (849 F.2d 464 (10th Cir. 1988)) for determining whether a party has waived its right to compel arbitration, the Court concluded that Cox did waive its right to compel arbitration. Accordingly, the Court affirmed the district court's decision. View "In re: Cox Enterprises" on Justia Law

Appellants William Karl Jenkins and M. Earlene Jenkins (collectively, Mr. Jenkins) appealed an order of the Bankruptcy Appellate Panel (BAP) that affirmed the bankruptcy court’s dismissal of their claim for the payment of certain secured promissory notes. Alternate Fuels, Inc. (AFI) was a Kansas corporation that formerly engaged in surface coal mining operations. On December 9, 1992, AFI filed a petition under Chapter 11 of the Bankruptcy Code in the District of Kansas. AFI briefly continued its coal mining operations under the terms of a confirmed plan of reorganization. At that time, John Warmack acquired 100% of the stock of AFI and assumed control. Mr. Warmack then formed Cimarron Energy Co., LLC to handle the mining operations for which AFI still held permits. Mr. Warmack owned 99% of Cimarron. Twenty-four certificates of deposit, valued at approximately $1.4 million, were pledged to secure multiple reclamation bonds. Then, Cimarron recommenced mining operations. AFI’s equipment was released to AFI’s secured creditors, who ultimately foreclosed and sold the equipment back to Cimarron. Mr. Jenkins entered into an agreement to purchase Mr. Warmack’s interest in AFI. Mr. Jenkins did not intend to resume mining operations or otherwise operate AFI. Instead, Mr. Jenkins believed that, through his political connections, he could fulfill AFI’s remaining reclamation obligations and obtain the proceeds of the release of the 24 certificates of deposit and the sale of Cimarron’s mining equipment. Mr. Jenkins testified that he knew AFI had no prospect of repaying two promissory noted from its own funds; his only prospects for future payment were the certificates of deposit. The bankruptcy court found that Mr. Jenkins’ claims were not allowed claims because the transfers alleged to be consideration for the notes should have been recharacterized as equity contributions. In the alternative, the court found that Mr. Jenkins failed to sustain his burden of proof as to the validity and amount of his claim, or that Mr. Jenkins putatively secured claim should have been subordinated to the status of an unsecured claim. The Tenth Circuit reversed, finding that Mr. Jenkins' transfers did not meet the criteria for either recharacterization or equitable subordination, and he satisfied his burden of proof as to the validity and amount of his claim. View "Redmond v. Jenkins" on Justia Law

At issue in this case was the district court's grant of summary judgment to the court-appointed receiver for Winsome Investment Trust, a business entity whose founder, Robert Andres, caused it to illegally distribute funds as part of a Ponzi scheme. The court found that Andres had fraudulently transferred funds from Winsome to William Cornelius and his law firm, Cornelius & Salhab, and that the receiver could recover these funds on Winsome's behalf under the Uniform Fraudulent Transfer Act (UFTA). Cornelius, who was unaware of the fraud, raised several challenges to the district court's jurisdiction and its judgment on the merits. Finding no reversible error, the Tenth Circuit affirmed: the receiver was entitled to sue Cornelius in Utah, and no federal jurisdictional impediments prevent the district court from reaching the UFTA claim. The district court also correctly concluded the payments to Cornelius violated the UFTA and the four-year statute of limitations did not bar the receiver's claim. View "Klein v. Cornelius" on Justia Law

CE Design, Ltd. sued Custom Mechanical Equipment in 2008 after it received a junk fax. CE Design brought a class action suit of people and businesses that had also received unsolicited faxes from Custom. After Custom's insurer, Emcasco Insurance Company, declined to defend, Custom settled with CE Design for a considerable sum. In settling, CE Design agreed not to enforce the judgment against Custom but to proceed directly against Emcasco. After Emcasco refused to pay the judgment, CE Design and Emcasco filed rival declaratory judgment suits in separate federal courts (CE Design in Oklahoma, and Emcasco in Illinois). Ultimately, the federal district court in Illinois transferred its case to the federal district court in Oklahoma. Based on the insurance policy's terms, the district court held that Emcasco had no duty to defend Custom or to pay the judgment. CE Design appealed. Finding no reversible error, the Tenth Circuit affirmed. View "Emcasco Insurance Co. v. CE Design" on Justia Law

Western Insurance Company was insolvent and was being liquidated in Utah state court pursuant to the Utah Insurer Receivership Act. As a part of that liquidation, the Liquidator brought an ancillary proceeding against several of Western's "affiliates" to recover funds Western had transferred to them. The Defendants removed the ancillary proceeding to federal district court pursuant to the court’s diversity jurisdiction. The Liquidator responded by seeking a remand, which the district court granted. Defendants appealed, but concluding that it lacked appellate jurisdiction the Tenth Circuit dismissed the appeal. View "Western Insurance v. A & H Insurance" on Justia Law

Siloam Springs Hotel, LLC operated a Hampton Inn hotel in Siloam Springs, Arkansas. It purchased a general liability insurance policy from Century Surety Company covering the Hampton Inn for the period of November 13, 2012, through November 13, 2013. Siloam Springs purchased the Commercial Lines Policy through Century Surety's agent, RCI Insurance Group of Claremore, Oklahoma. On January 21, 2013, several guests at the Hampton Inn suffered bodily injury due to a sudden, accidental leak of carbon monoxide from the heating element of an indoor swimming pool. Siloam Springs sought coverage under the Commercial Lines Policy. Century Surety denied coverage, relying on an exclusion set out in the Commercial Lines Policy. That provision (the "Indoor Air Exclusion") excluded from coverage "[b]odily injury' . . . arising out of, caused by, or alleging to be contributed to in any way by any toxic, hazardous, noxious, irritating, pathogenic or allergen qualities or characteristics of indoor air regardless of cause." After Century Surety removed the case to federal court, the parties filed cross-motions for summary judgment. In its motion, Century Surety asserted that because the insurance contract was to be performed in Arkansas, Oklahoma choice-of-law rules made Arkansas law applicable. It further argued that the Indoor Air Exclusion unambiguously excluded coverage for the carbon-monoxide based injuries to the guests at the Hampton Inn. For its part, Siloam Springs "decline[d] to contest" Century Surety's assertion that Arkansas law applied because, it asserted, "Arkansas law does not differ from Oklahoma law in any way material to [the] coverage dispute." As to the merits, Siloam Springs asserted the Indoor Air Exclusion was ambiguous and, as such, had to be construed in favor of coverage. Without definitively resolving whether Oklahoma or Arkansas law applied, but relying on precedent from Arkansas, the district court granted summary judgment to Century Surety. The issue this case presented for the Tenth Circuit's review called for the Court to determine the citizenship, for purposes of diversity jurisdiction, of a limited liability company ("LLC"). Because the materials before the Court did not demonstrate that complete diversity of citizenship existed at the time of the filing of the complaint, the matter was remanded to the district court for further proceedings. View "Siloam Springs Hotel v. Century Surety Co." on Justia Law

Multiple plaintiffs, including ConAgra Foods, Inc. and Swift-Eckrich, Inc., brought suit in Kansas state court against Americold Logistics, LLC and Americold Realty Trust (the "Americold entities"). The Americold entities removed the case to the United States District Court for the District of Kansas. As grounds for removal, the Americold entities argued the parties were completely diverse. No party challenged the propriety of removal; the district court did not address the issue. The merits of the suit were submitted to the district court on cross-motions for summary judgment. The district court granted summary judgment to the Americold entities. ConAgra and Swift-Eckrich then appealed. The Tenth Circuit Court of Appeals ordered the Americold entities to file a supplemental brief addressing whether the citizenship of a trust was determined by exclusive reference to the citizenship of its trustees? According to "Carden v. Arkoma Associates," (494 U.S. 185 (1990)), the answer to this question was "no:" the citizenship of a trust, just like the citizenship of all other artificial entities except corporations, is determined by examining the citizenship "of all the entity's members." That being the case, the Tenth Circuit concluded the district court lacked subject matter jurisdiction over the suit underlying this appeal. The case was remanded back to the district court for vacation of its judgment on the merits and for remand of the matter to state court. View "Conagra Foods v. Americold Logistics" on Justia Law

This appeal stemmed from a putative securities fraud class action brought by lead plaintiff Nitesh Banker on behalf of all persons who purchased common stock in Gold Resource Corporation (GRC) during the class period between January 30, 2012, and November 8, 2012. GRC, a Colorado corporation, was a publicly traded mining company engaged in Mexico in the exploration and production of precious metals, including gold and silver. GRC’s aggressive business plan called for a dramatic increase in mining production during its initial years. Plaintiff alleged the "El Aguila" project experienced severe production problems during the class period, and that defendants knew about these problems but concealed them from investors. Plaintiff alleged GRC and four of its officers and directors committed securities fraud in violation of federal securities laws. He also asserted claims against individual defendants as "control persons." The district court dismissed the complaint with prejudice pursuant to Fed. R. Civ. P. 12(b)(6), holding that plaintiff failed to meet the heightened pleading standard for scienter required by the Private Securities Litigation Reform Act of 1995. Plaintiff appealed. But finding no reversible error, the Tenth Circuit affirmed. View "In re: Gold Resource Corp." on Justia Law