Justia Alabama Supreme Court Opinion SummariesArticles Posted in Securities Law
Dzwonkowski v. Sonitrol of Mobile, Inc.
This appeal was the latest "in a decade-long dispute" between Joseph Dzwonkowski, Sr. (Joe Sr.) and two of his sons, Robert and Joseph Jr. (Joe Jr.) regarding the ownership and control of Sonitrol of Mobile, Inc., a closely-held corporation that provided commercial-security services in the greater Mobile area. Ten years prior, Joe Jr. sold his shares in the company to his father in order to settle some of his personal debts. Possession of the stock certificates was the central issue in the case. Joe Sr. fired his sons and offered to purchase their shares, but Joe Jr. demanded his former shares back from his father. Joe Sr. then filed suit for a declaratory judgment to determine who rightfully owned the stock and to uphold his decision to fire his sons. The trial court ruled against Joe Sr. In 2004, the Supreme Court dismissed Joe Sr.'s appeal of that judgment, holding that an appeal was premature because the damages to be awarded to Sonitrol had not yet been set. Those damages were eventually set in 2011, awarding Sonitrol $764,359 and Joe Jr. $1. Joe Sr. appealed. On appeal, Joe Sr. argued whether the trial court should have immediately entered an order declaring him owner of the disputed shares of Sonitrol stock. The Supreme Court found that the trial court did not act contrary to the appellate court's mandate on remand. Accordingly the trial court's judgment was affirmed. View "Dzwonkowski v. Sonitrol of Mobile, Inc." on Justia Law
Perdue v. Callan Associates, Inc.
Callan Associates petitioned the Supreme Court for the writ of mandamus to direct the Montgomery Circuit Court to dismiss an action filed by Carol Perdue in her role as the legal guardian of Anna Perdue, who sued on behalf of the Wallace-Folsom Prepaid College Trust Fund. Ms. Perdue opened an account with the Trust Fund on behalf of her Daughter Anna. After making monthly payments, Anna would be entitled to reduced in-state tuition and fees. The Trust's assets pooled all such contributions and invested them so that designated beneficiaries would receive the promised benefits. The Trust hired Callan Associates as an investment consultant. The Trust's management notified beneficiaries that because of the stock market downturn of 2009, the Trust's assets were negatively impacted. Subsequently, Ms. Perdue sued on behalf of Anna and the Trust, contending that Callan and the Trustees mismanaged the Trust's assets. Callan moved to dismiss which the Circuit Court denied. On appeal to the Supreme Court, Callan argued that Ms. Perdue lacked standing to bring her claims. Furthermore, Callan argued that Ms. Perdue's claims were not ripe for adjudication since none of the beneficiaries have had tuition paid from the Trust. The Supreme Court concluded that "Callan's motion to dismiss in the trial court was well founded"; therefore the Court granted Callan's petition and issued the requested writ to direct the trial court to dismiss Ms. Perdue's claims. View "Perdue v. Callan Associates, Inc." on Justia Law
Reed v. Regions Bank
Jean W. Reed, Mary W. Haynes, and Susan W. Stockham ("the sisters") sued Regions Bank ("Regions"), Morgan Asset Management, Inc. ("MAM"), Morgan Keegan & Company, Inc. ("Morgan Keegan"), and Regions Financial Corporation ("RFC"), alleging several claims related to the investment of assets belonging to two trusts set up for the benefit of Reed and Haynes. MAM, Morgan Keegan, and RFC unsuccessfully moved the Jefferson Circuit Court to dismiss the claims against them, arguing among other things, that the claims were derivative in nature and could be asserted only in compliance with Rule 23.1, Ala. R. Civ. P., with which the sisters did not comply. MAM, Morgan Keegan, and RFC petitioned the Supreme Court for a writ of mandamus to direct the circuit court to grant their motion to dismiss. Upon review, the Supreme Court found that the sisters had not alleged an injury distinct from that suffered by the trusts' funds; the claims against MAM, Morgan Keegan, and RFC in their complaint were derivative and did not comply with Rule 23.1 for asserting such claims. The sisters therefore lacked standing to sue. The Court granted the petition and issued the writ. View "Reed v. Regions Bank" on Justia Law
27001 Partnership v. Kohlberg Kravis Roberts & Co., L.P.
Defendants Kohlberg Kravis Roberts & Company, L.P. (KKR), KKR Associates, KKR Partners II, and Crimson Associates, L.P., as well as several individuals, petitioned the Supreme Court for the writ of mandamus to direct a circuit court to vacate its order that denied their motion to dismiss Plaintiffs' complaint because it lacked personal jurisdiction. The plaintiffs in this action were 46 individuals, partnerships, corporations, foundations, trusts and retirement and pension funds located throughout the country that invested in certain promissory notes issued as part of a leveraged recapitalization of Bruno's Inc., a supermarket-grocery business with its headquarters in Alabama. Plaintiffs contended that despite a negative due-diligence report from its forensic accountant, KKR decided to proceed with its acquisition of Bruno's. In order to achieve the recapitalization, Plaintiffs alleged that Defendants made material, fraudulent misrepresentations to the Plaintiffs' investment money manger that induced them into purchasing the notes. Based on the torts allegedly committed by the individual defendants, the Supreme Court concluded that the circuit court did not err in denying Defendants' motion to dismiss based on lack of personal jurisdiction. The Court denied Defendants' application for the writ of mandamus, and remanded the case for further proceedings. View "27001 Partnership v. Kohlberg Kravis Roberts & Co., L.P." on Justia Law
Altrust Financial Services, Inc. v. Adams
Plaintiffs James Adams, Stanley Dye and Ed Holcombe were all shareholders in Altrust Financial Services, Inc. They sued Altrust, the Peoples Bank of Alabama (collectively, Altrust) and Dixon Hughes, LLC, Altrust's public-accounting firm, for violating the Alabama Securities Act. Altrust is a holding company that fully owns, controls and directs the operations of the Bank. Altrust and the Bank share common officers and directors and issue consolidated financial statements. Shareholders voted to reorganize the company in 2008 from a publicly held company to a privately held company. The move would have freed the company of certain reporting obligations imposed by the federal Securities Exchange Act and allowed the company to elect Subchapter S status for tax purposes. Relying on information in a proxy statement, Plaintiffs elected not to sell their shares of Altrust stock and instead voted for reorganization. Plaintiffs alleged that the proxy statement and financial reports contained material misrepresentations and omissions that induced them to ultimately sign shareholder agreements that made them shareholders in the newly reorganized Altrust. Plaintiffs contended that if (in their view) instances of mismanagement, self-dealing, interested-party transactions and "skewing" of company liabilities had been fully disclosed, they would have elected to sell their shares rather than remain as shareholders. Upon review, the Supreme Court found that Plaintiffs' allegations were not specific to them but to all shareholders, and as such, they did not have standing to assert a direct action against the company. Because Plaintiffs did not have standing to assert claims against Altrust, they also lacked standing to assert professional negligence claims against the accounting firm. The Court remanded the case for further proceedings. View "Altrust Financial Services, Inc. v. Adams" on Justia Law