Justia Securities Law Opinion Summaries

Articles Posted in North Dakota Supreme Court
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Wayne Munson appealed a district court judgment granting Indigo Acquisition Holdings’ (IAH) motion for judgment on the pleadings. In 2009, Munson and other employees of Indigo Signworks entered into an agreement to participate in a Stock Appreciation Rights (SAR) program rather than receive bonuses. Under the program, Munson would be paid for his SARs if Indigo Signworks was sold. In 2016, IAH, a Delaware corporation, purchased Indigo Signworks. Munson and other employees participating in the SAR program were paid for their SARs and had the opportunity to reinvest in IAH’s membership units. In 2016, Munson purchased 12,500 Class A Units of IAH. In July 2018, Munson left his employment at Indigo Signworks to begin a competing sign company. IAH alleged this new business violated Munson’s obligations under IAH’s Amended LLC Agreement and filed suit in Delaware. In September 2018, Munson served IAH with a complaint seeking to void his purchase of the IAH Units. Munson argued the IAH Units he purchased were unexempt, unregistered securities under the North Dakota Securities Act. The North Dakota Supreme Court concluded the transaction at issue was exempt under the North Dakota Securities Act, and affirmed. View "Munson v. Indigo Acquisition Holdings, LLC, et al." on Justia Law

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Karna Kornkven, Eric Molbert, and Kristi Benz ("Siblings") appeal after the district court entered judgment in favor of their brother, Lauris Molbert. The parties' father, Ralph Molbert, owned the controlling interest in the Bank of Steele and its holding company, H.O.M.E., Inc. Lauris, the oldest child, became a director of the bank in 1983 and director of the holding company in 1986 and was actively involved in the operations of both entities. Ralph and Beverly Molbert intended for Lauris Molbert to own and control the bank and holding company and pursued this intention through their estate plan. In December 1992, Ralph and Beverly Molbert gifted their children shares of H.O.M.E. stock and recorded the gift for tax purposes in 1992. It was understood that Ralph and Beverly intended to restrict these gifted shares. Following the gift of H.O.M.E. shares to the Molbert children, H.O.M.E. board minutes signed by Ralph and Beverly described the development of a shareholder agreement to restrict the gifted shares. In July 1993, the parties discussed the agreement while on a family vacation to Whitefish, Montana. The parties executed the stock purchase agreement following the Whitefish vacation. Ralph signed the agreement as H.O.M.E. president. Share certificates were issued after execution of the agreement stating the gifted shares were restricted by the stock purchase agreement. The agreement granted Lauris the right to vote the Siblings' shares. The agreement also granted him the irrevocable right to purchase the Siblings' shares at book value. Lauris sent written notice to the Siblings that he was exercising the call option set forth in Paragraph Seven of the stock purchase agreement. The Siblings refused to transfer their shares. Molbert sued the Siblings for specific performance, seeking a judgment requiring them to sell their shares to him in exchange for the book value payment. The Siblings counterclaimed, alleging the stock purchase agreement was void because Lauris engaged in fraud by failing to disclose that the agreement granted him a purchase option at book value. The Siblings also alleged the agreement lacked consideration and Lauris breached fiduciary duties owed to them. The Siblings sought relief in the form of cancellation of the agreement. Judgment was entered in Lauris' favor; finding no reversible error in that judgment, the North Dakota Supreme Court affirmed. View "Molbert v. Kornkven" on Justia Law

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Karna Kornkven, Eric Molbert, and Kristi Benz ("Siblings") appeal after the district court entered judgment in favor of their brother, Lauris Molbert. The parties' father, Ralph Molbert, owned the controlling interest in the Bank of Steele and its holding company, H.O.M.E., Inc. Lauris, the oldest child, became a director of the bank in 1983 and director of the holding company in 1986 and was actively involved in the operations of both entities. Ralph and Beverly Molbert intended for Lauris Molbert to own and control the bank and holding company and pursued this intention through their estate plan. In December 1992, Ralph and Beverly Molbert gifted their children shares of H.O.M.E. stock and recorded the gift for tax purposes in 1992. It was understood that Ralph and Beverly intended to restrict these gifted shares. Following the gift of H.O.M.E. shares to the Molbert children, H.O.M.E. board minutes signed by Ralph and Beverly described the development of a shareholder agreement to restrict the gifted shares. In July 1993, the parties discussed the agreement while on a family vacation to Whitefish, Montana. The parties executed the stock purchase agreement following the Whitefish vacation. Ralph signed the agreement as H.O.M.E. president. Share certificates were issued after execution of the agreement stating the gifted shares were restricted by the stock purchase agreement. The agreement granted Lauris the right to vote the Siblings' shares. The agreement also granted him the irrevocable right to purchase the Siblings' shares at book value. Lauris sent written notice to the Siblings that he was exercising the call option set forth in Paragraph Seven of the stock purchase agreement. The Siblings refused to transfer their shares. Molbert sued the Siblings for specific performance, seeking a judgment requiring them to sell their shares to him in exchange for the book value payment. The Siblings counterclaimed, alleging the stock purchase agreement was void because Lauris engaged in fraud by failing to disclose that the agreement granted him a purchase option at book value. The Siblings also alleged the agreement lacked consideration and Lauris breached fiduciary duties owed to them. The Siblings sought relief in the form of cancellation of the agreement. Judgment was entered in Lauris' favor; finding no reversible error in that judgment, the North Dakota Supreme Court affirmed. View "Molbert v. Kornkven" on Justia Law