"Top 10 Business Law Cases of the Year (2016)," Idaho State Bar Business & Corporate Law Section, May 6, 2016

1. Business & Corporate Law Section Annual CLE
Top 10 Business Law Cases
from the Past Year
May 6, 2016
Wendy Gerwick Couture
Associate Professor of Law
University of Idaho
***Slides posted on SlideShare.

2.  Contracts
 Constructive Fraud
 Assignment of Claims
 Exclusions from Coverage
 Forum Selection Clauses
 Delaware: Pre-Merger Statements
 Delaware: Disclosure-Only Settlements
 ERISA Reimbursement
 Securities Fraud
X

3. 1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).
Bingham Memorial
Hospital Foundation
Campbell

4. 1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).
Bingham Memorial
Hospital Foundation
Campbell
Parkway
Surgery
Center, LLC
Orally: “take care of”
Campbell’s obligation
to Bingham

5. 1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).
Bingham Memorial
Hospital Foundation
Campbell
Parkway
Surgery
Center, LLC
Orally: “take care of”
Campbell’s obligation
to Bingham
Quit her job and
began working at
Parkway
Owes $ to
repay loan

6. 1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).
Bingham Memorial
Hospital Foundation
Campbell
Parkway
Surgery
Center, LLC
Orally: “take care of”
Campbell’s obligation
to Bingham
Quit her job and
began working at
Parkway
Owes $ to
repay loan

7. Court’s Opinion (J. Burdick): “[T]his Court is astonished that Parkway would
attempt to argue on appeal that Campbell received ‘the benefit of her bargain.’ Such
an argument is, at a minimum, baseless and disingenuous.”
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

8. Court’s Opinion (J. Burdick): “[T]his Court is astonished that Parkway would
attempt to argue on appeal that Campbell received ‘the benefit of her bargain.’ Such
an argument is, at a minimum, baseless and disingenuous.”
Special Concurrence (J. J. Jones): “Throughout the proceedings, Parkway has
professed not to understand what ‘take care of’ means. I would expect that when
several people are eating at the same table at a restaurant in Blackfoot and one says
he will ‘take care of’ the bill, everyone at the table understands what he means. It
means he will pay the bill, rather than sitting around for years hoping that the
waitperson will never bring it.”
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

9. 1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).
Bingham Memorial
Hospital Foundation
Campbell
Parkway
Surgery
Center, LLC
Orally: “take care of”
Campbell’s obligation
to Bingham
Quit her job and
began working at
Parkway
Owes $ to
repay loan

10. I.C. § 9-505. Certain agreements to be in writing
In the following cases the agreement is invalid, unless the same or some note or
memorandum thereof, be in writing and subscribed by the party charged, or by his
agent. Evidence, therefore, of the agreement cannot be received without the writing or
secondary evidence of its contents:
. . .
2. A special promise to answer for the debt . . . of another, except in the cases provided
for in section 9-506, Idaho Code.
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

11. I.C. § 9-505. Certain agreements to be in writing
In the following cases the agreement is invalid, unless the same or some note or
memorandum thereof, be in writing and subscribed by the party charged, or by his
agent. Evidence, therefore, of the agreement cannot be received without the writing or
secondary evidence of its contents:
. . .
2. A special promise to answer for the debt . . . of another, except in the cases provided
for in section 9-506, Idaho Code.
§ 9-506. Original obligations--Writing not needed
A promise to answer for the obligation of another, in
any of the following cases, is deemed an original
obligation of the promisor, and need not be in writing:
. . .
3. Where the promise, being for an antecedent
obligation of another, is made . . . upon a consideration
beneficial to the promisor, whether moving from either
party to the antecedent obligation, or from another
person.
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

12. I.C. § 9-505. Certain agreements to be in writing
In the following cases the agreement is invalid, unless the same or some note or
memorandum thereof, be in writing and subscribed by the party charged, or by his
agent. Evidence, therefore, of the agreement cannot be received without the writing or
secondary evidence of its contents:
. . .
2. A special promise to answer for the debt . . . of another, except in the cases provided
for in section 9-506, Idaho Code.
§ 9-506. Original obligations--Writing not needed
A promise to answer for the obligation of another, in
any of the following cases, is deemed an original
obligation of the promisor, and need not be in writing:
. . .
3. Where the promise, being for an antecedent
obligation of another, is made . . . upon a consideration
beneficial to the promisor, whether moving from either
party to the antecedent obligation, or from another
person.
= “if the
promisor
obtains a
direct
benefit”
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

13. 1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).
Bingham Memorial
Hospital Foundation
Campbell
Parkway
Surgery
Center, LLC
Orally: “take care of”
Campbell’s obligation
to Bingham
Quit her job and
began working at
Parkway
Owes $ to
repay loan

14. 1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).
Bingham Memorial
Hospital Foundation
Campbell
Parkway
Surgery
Center, LLC
Orally: “take care of”
Campbell’s obligation
to Bingham
Quit her job and
began working at
Parkway
Owes $ to
repay loan
$
$

15. “Parkway cites to two Idaho cases for the proposition that a party must show it suffered
economic injury before it can recover damages for a breach of an agreement to pay a debt. See
Melaleuca, Inc. v. Foeller, 155 Idaho 920, 924, 318 P.3d 910, 914 (2014); Bergkamp v.
Martin, 114 Idaho 650, 653, 759 P.2d 941, 944 (Ct.App.1988).”
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

16. “Parkway cites to two Idaho cases for the proposition that a party must show it suffered
economic injury before it can recover damages for a breach of an agreement to pay a debt. See
Melaleuca, Inc. v. Foeller, 155 Idaho 920, 924, 318 P.3d 910, 914 (2014); Bergkamp v.
Martin, 114 Idaho 650, 653, 759 P.2d 941, 944 (Ct.App.1988).”
“Melaleuca cites to Bergkamp for the proposition that a party must show it has
been economically injured before it can recover damages for a breach of contract. .
. . Bergkamp, in turn, cites to 5 A. Corbin, Corbin on Contracts § 1003 (1964), for
that same proposition. Bergkamp, 114 Idaho at 653, 759 P.2d at 944. However,
turning to the relevant section in Corbin, there is nothing that states a party must
show an ‘economic injury’ before being able to recover damages.”
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

17. “Parkway cites to two Idaho cases for the proposition that a party must show it suffered
economic injury before it can recover damages for a breach of an agreement to pay a debt. See
Melaleuca, Inc. v. Foeller, 155 Idaho 920, 924, 318 P.3d 910, 914 (2014); Bergkamp v.
Martin, 114 Idaho 650, 653, 759 P.2d 941, 944 (Ct.App.1988).”
“Melaleuca cites to Bergkamp for the proposition that a party must show it has
been economically injured before it can recover damages for a breach of contract. .
. . Bergkamp, in turn, cites to 5 A. Corbin, Corbin on Contracts § 1003 (1964), for
that same proposition. Bergkamp, 114 Idaho at 653, 759 P.2d at 944. However,
turning to the relevant section in Corbin, there is nothing that states a party must
show an ‘economic injury’ before being able to recover damages.”
“Thus, we want to clarify that, at least for purposes of third-party
beneficiary contracts involving a promise to pay another's debt, it is
not necessary to show an ‘economic injury’ before a plaintiff can
recover damages for a breach.”
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

18. “Parkway cites to two Idaho cases for the proposition that a party must show it suffered
economic injury before it can recover damages for a breach of an agreement to pay a debt. See
Melaleuca, Inc. v. Foeller, 155 Idaho 920, 924, 318 P.3d 910, 914 (2014); Bergkamp v.
Martin, 114 Idaho 650, 653, 759 P.2d 941, 944 (Ct.App.1988).”
“Melaleuca cites to Bergkamp for the proposition that a party must show it has
been economically injured before it can recover damages for a breach of contract. .
. . Bergkamp, in turn, cites to 5 A. Corbin, Corbin on Contracts § 1003 (1964), for
that same proposition. Bergkamp, 114 Idaho at 653, 759 P.2d at 944. However,
turning to the relevant section in Corbin, there is nothing that states a party must
show an “economic injury” before being able to recover damages.”
“Thus, we want to clarify that, at least for purposes of third-party
beneficiary contracts involving a promise to pay another's debt, it is
not necessary to show an ‘economic injury’ before a plaintiff can
recover damages for a breach.”
???
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

19. 1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).
Bingham Memorial
Hospital Foundation
Campbell
Parkway
Surgery
Center, LLC
Orally: “take care of”
Campbell’s obligation
to Bingham
Quit her job and
began working at
Parkway
Owes $ to
repay loan
$
$

20. Restatement (Second) of Contracts § 305, illus. 4.
A owes C $100. For consideration B promises A to pay the debt to C. On B's
breach A may obtain a judgment for $100 against B. But the court may protect B
against double payment by permitting joinder of C, by an order that money
collected by A is to be applied to reduce A's debt to C, by giving B credit on the
judgment for payments to C which reduce A's obligation, or by enjoining
enforcement of the judgment to the extent of such payment.
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

21. Restatement (Second) of Contracts § 305, illus. 4.
A owes C $100. For consideration B promises A to pay the debt to C. On B's
breach A may obtain a judgment for $100 against B. But the court may protect B
against double payment by permitting joinder of C, by an order that money
collected by A is to be applied to reduce A's debt to C, by giving B credit on the
judgment for payments to C which reduce A's obligation, or by enjoining
enforcement of the judgment to the extent of such payment.
“Parkway breached its agreement with Campbell when it refused to
pay Campbell's loan. Consequently, Campbell was entitled to
damages in the amount of the outstanding loan. Thus, the district
court erred when it reversed the magistrate's decision so holding. We
therefore reverse that aspect of the district court's decision and
remand to the district court to reinstate the damage award plus any
accrued interest. We note that the court can protect against double
recovery by ordering Campbell to pay the money to BMH upon
receipt.”
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

22. 1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).
Bingham Memorial
Hospital Foundation
Campbell
Parkway
Surgery
Center, LLC
Orally: “take care of”
Campbell’s obligation
to Bingham
Quit her job and
began working at
Parkway
Owes $ to
repay loan
$6,800

23. Special Concurrence (J. J. Jones):
“Parkway incurred monetary indebtedness in the sum of
$76,835.96, plus (1) interest, (2) costs of suit, (3) fees awarded by
this Court, and (4) the fees of its own attorneys, in its quest to beat
a $6,800 contractual obligation. In addition to tying up court time
that could have been devoted to meritorious matters, Parkway's
conduct has undoubtedly taken a toll on Campbell, who only
wanted Parkway to honor its contractual obligation. It is
unfortunate that she had to put up with this course of misconduct.
The fee awards may help to relieve the burden and, hopefully, will
cause Parkway to conform to more acceptable behavioral norms
in the future.”
1. Campbell v. Parkway Surgery Ctr., LLC, 354 P.3d 1172 (Idaho 2015).

24.  Contracts
 Constructive Fraud
 Assignment of Claims
 Exclusions from Coverage
 Forum Selection Clauses
 Delaware: Pre-Merger Statements
 Delaware: Disclosure-Only Settlements
 ERISA Reimbursement
 Securities Fraud
X

25. 3. Doe v. Boy Scouts of America, 356 P.3d 1049 (Idaho 2015).
John Does
Boy Scouts of
America & LDS
Church
CONSTRUCTIVE
FRAUD

26. 3. Doe v. Boy Scouts of America, 356 P.3d 1049 (Idaho 2015).
John Does
Boy Scouts of
America & LDS
Church
CONSTRUCTIVE
FRAUD
• Allegedly knew about the
danger but failed to disclose it
• Allegedly affirmatively
represented that each scout
leader was a “great guy,” a
“wonderful man,” or a “friend
to whom you can always turn
for advice”

27. 3. Doe v. Boy Scouts of America, 356 P.3d 1049 (Idaho 2015).
§ 5-218. Statutory
liabilities, trespass, trover,
replevin, and fraud
Within three (3) years:
. . .
4. An action for relief on the
ground of fraud or mistake.
The cause of action in such
case not to be deemed to
have accrued until the
discovery, by the aggrieved
party, of the facts
constituting the fraud or
mistake.
§ 5-219. Actions against
officers, for penalties, on
bonds, and for
professional malpractice
or for personal injuries
Within two (2) years:
. . .
4. An action to recover
damages for professional
malpractice, or for an
injury to the person, . . .
§ 5-224. Actions for
other relief
An action for relief not
hereinbefore provided for
must be commenced
within four (4) years after
the cause of action shall
have accrued.

28. 3. Doe v. Boy Scouts of America, 356 P.3d 1049 (Idaho 2015).
§ 5-218. Statutory
liabilities, trespass, trover,
replevin, and fraud
Within three (3) years:
. . .
4. An action for relief on the
ground of fraud or mistake.
The cause of action in such
case not to be deemed to
have accrued until the
discovery, by the aggrieved
party, of the facts
constituting the fraud or
mistake.
§ 5-219. Actions against
officers, for penalties, on
bonds, and for
professional malpractice
or for personal injuries
Within two (2) years:
. . .
4. An action to recover
damages for professional
malpractice, or for an
injury to the person, . . .
§ 5-224. Actions for
other relief
An action for relief not
hereinbefore provided for
must be commenced
within four (4) years after
the cause of action shall
have accrued.X

29. 3. Doe v. Boy Scouts of America, 356 P.3d 1049 (Idaho 2015).
ELEMENTS OF
ACTUAL FRAUD
ELEMENTS OF
CONSTRUCTIVE
FRAUD
 Statement or misrepresentation of
fact
 Its falsity
 Its materiality
 The speaker’s knowledge of its
falsity
 The speaker’s intent that there be
reliance
 The hearer’s ignorance of the falsity
of the statement
 Reliance by the hearer
 Justifiable reliance
 Resultant injury
 Statement or misrepresentation of
fact
 Its falsity
 Its materiality
 The speaker’s knowledge of its
falsity
 The speaker’s intent that there be
reliance
 The hearer’s ignorance of the falsity
of the statement
 Reliance by the hearer
 Justifiable reliance
 Resultant injury
 Breach of a duty arising from a
relationship of trust & confidence

30. 3. Doe v. Boy Scouts of America, 356 P.3d 1049 (Idaho 2015).
§ 5-218. Statutory
liabilities, trespass, trover,
replevin, and fraud
Within three (3) years:
. . .
4. An action for relief on the
ground of fraud or mistake.
The cause of action in such
case not to be deemed to
have accrued until the
discovery, by the aggrieved
party, of the facts
constituting the fraud or
mistake.
§ 5-219. Actions against
officers, for penalties, on
bonds, and for
professional malpractice
or for personal injuries
Within two (2) years:
. . .
4. An action to recover
damages for professional
malpractice, or for an
injury to the person, . . .
§ 5-224. Actions for
other relief
An action for relief not
hereinbefore provided for
must be commenced
within four (4) years after
the cause of action shall
have accrued.X Breach of fiduciary duty

31. 3. Doe v. Boy Scouts of America, 356 P.3d 1049 (Idaho 2015).
ELEMENTS OF
CONSTRUCTIVE
FRAUD
 Statement or misrepresentation of
fact
 Its falsity
 Its materiality
 The speaker’s knowledge of its
falsity
 The speaker’s intent that there be
reliance
 The hearer’s ignorance of the falsity
of the statement
 Reliance by the hearer
 Justifiable reliance
 Resultant injury
 Breach of a duty arising from a
relationship of trust & confidence
BROADER THAN
FIDUCIARY
RELATIONSHIP:
other examples are members
of the same family, partners,
attorney and client, principal
and agent, & close friends

32. 3. Doe v. Boy Scouts of America, 356 P.3d 1049 (Idaho 2015).
Breach of
Fiduciary
Duty
Constructive
Fraud

33. 3. Doe v. Boy Scouts of America, 356 P.3d 1049 (Idaho 2015).
§ 5-218. Statutory
liabilities, trespass, trover,
replevin, and fraud
Within three (3) years:
. . .
4. An action for relief on the
ground of fraud or mistake.
The cause of action in such
case not to be deemed to
have accrued until the
discovery, by the aggrieved
party, of the facts
constituting the fraud or
mistake.
§ 5-219. Actions against
officers, for penalties, on
bonds, and for
professional malpractice
or for personal injuries
Within two (2) years:
. . .
4. An action to recover
damages for professional
malpractice, or for an
injury to the person, . . .
§ 5-224. Actions for
other relief
An action for relief not
hereinbefore provided for
must be commenced
within four (4) years after
the cause of action shall
have accrued.X Breach of fiduciary duty
Constructive fraud

34.  Contracts
 Constructive Fraud
 Assignment of Claims
 Exclusions from Coverage
 Forum Selection Clauses
 Delaware: Pre-Merger Statements
 Delaware: Disclosure-Only Settlements
 ERISA Reimbursement
 Securities Fraud
X

35. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
Fawnwood,
LLC
(ID)
JBM Company,
LLC
(WY)
Loan $$$
Cintorino
(member)

36. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
Fawnwood,
LLC
(ID)
JBM Company,
LLC
(WY)
Cintorino
(member)
Promissory note,
secured by deed
of trust, to
“JBM, LLC”
Personal
guarantee to
“JBM, LLC”
Loan $$$

37. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
Fawnwood,
LLC
(ID)
JBM Company,
LLC
(WY)
Cintorino
(member)
Loan $$$
Promissory note,
secured by deed
of trust, to
“JBM, LLC”
Personal
guarantee to
“JBM, LLC”

38. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).

39. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
Fawnwood,
LLC
(ID)
JBM Company,
LLC
(WY)
Cintorino
(member)
Loan $$$
Promissory note,
secured by deed
of trust, to
“JBM, LLC”
Personal
guarantee to
“JBM, LLC”
McAdams, LLC
(ID)
Assigned all
interest in
promissory note
& property

40. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
I.C. § 53-509. Consequences of
noncompliance (effective until 7/1/15)
(1) Any person who transacts business in Idaho
under an assumed business name without
having complied with the requirements of this
chapter shall not be entitled to maintain any
legal action in the courts of this state until the
person has filed a certificate of assumed
business name as required by this chapter.

41. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
I.C. § 53-509. Consequences of
noncompliance (effective until 7/1/15)
(1) Any person who transacts business in Idaho
under an assumed business name without
having complied with the requirements of this
chapter shall not be entitled to maintain any
legal action in the courts of this state until the
person has filed a certificate of assumed
business name as required by this chapter.
I.C. § 30-6-808. Effect of failure to have
certificate of authority (effective until 7/1/17)
(1) A foreign limited liability company
transacting business in this state may not
maintain an action or proceeding in this state
unless it has a certificate of authority to transact
business in this state.

42. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
“An assignee takes the subject of the assignment with all the rights and remedies
possessed by and available to the assignor.”

43. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
“An assignee takes the subject of the assignment with all the rights and remedies
possessed by and available to the assignor.”
“An assignee generally acquires no greater right than was possessed by the
assignor, and is subject to all defenses and claims that the debtor had against the
assignor.”

44. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
“An assignee takes the subject of the assignment with all the rights and remedies
possessed by and available to the assignor.”
“An assignee generally acquires no greater right than was possessed by the
assignor, and is subject to all defenses and claims that the debtor had against the
assignor.”
“An assignee is not subject to just any claim or defense but, rather, is subject only
to claims and defenses that go to the validity or enforceability of the right
transferred.”

45. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
I.C. § 53-509. Consequences of
noncompliance (effective until 7/1/15)
(1) Any person who transacts business in Idaho
under an assumed business name without
having complied with the requirements of this
chapter shall not be entitled to maintain any
legal action in the courts of this state until the
person has filed a certificate of assumed
business name as required by this chapter.
I.C. § 30-6-808. Effect of failure to have
certificate of authority (effective until 7/1/17)
(1) A foreign limited liability company
transacting business in this state may not
maintain an action or proceeding in this state
unless it has a certificate of authority to transact
business in this state.
“While IABNA prohibits
an entity in violation from
filing suit in Idaho, it does
not invalidate contracts
entered into by that entity.”

46. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
I.C. § 53-509. Consequences of
noncompliance (effective until 7/1/15)
(1) Any person who transacts business in Idaho
under an assumed business name without
having complied with the requirements of this
chapter shall not be entitled to maintain any
legal action in the courts of this state until the
person has filed a certificate of assumed
business name as required by this chapter.
I.C. § 30-6-808. Effect of failure to have
certificate of authority (effective until 7/1/17)
(1) A foreign limited liability company
transacting business in this state may not
maintain an action or proceeding in this state
unless it has a certificate of authority to transact
business in this state.
“While IABNA prohibits
an entity in violation from
filing suit in Idaho, it does
not invalidate contracts
entered into by that entity.”
I.C. § 30-6-808. (2) The failure of
a foreign limited liability company
to have a certificate of authority to
transact business in this state does
not impair the validity of a contract
or act of the company . . .

47. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
Fawnwood,
LLC
(ID)
JBM Company,
LLC
(WY)
Cintorino
(member)
Loan $$$
Promissory note,
secured by deed
of trust, to
“JBM, LLC”
Personal
guarantee to
“JBM, LLC”
McAdams, LLC
(ID)
Assigned all
interest in
promissory note
& property

48. 6. JBM, LLC v. Cintorino, 367 P.3d 167 (Idaho 2016).
I.C. § 53-509. Consequences of noncompliance
(effective until 7/1/15)
(1) Any person who transacts business in Idaho
under an assumed business name without having
complied with the requirements of this chapter
shall not be entitled to maintain any legal action
in the courts of this state until the person has filed
a certificate of assumed business name as
required by this chapter.
I.C. § 30-6-808. Effect of failure to have
certificate of authority (effective until 7/1/17)
(1) A foreign limited liability company
transacting business in this state may not
maintain an action or proceeding in this state
unless it has a certificate of authority to transact
business in this state.
(2) The failure of a foreign limited liability
company to have a certificate of authority to
transact business in this state does not impair the
validity of a contract or act of the company . . .
I.C. § 30-21-810. Consequences of
noncompliance (effective 7/1/15)
(a) Any person who transacts business in Idaho
under an assumed business name without having
complied with the requirements of this chapter
shall not be entitled to maintain any legal action
in the courts of this state until the person has filed
a certificate of assumed business name as
required by this chapter.
I.C. § 30-21-502. Registration to do business in
this state
. . .
(b) A foreign filing entity or foreign limited
liability partnership doing business in this state
may not maintain an action or proceeding in this
state unless it is registered to do business in this
state.
(c) The failure of a foreign filing entity or foreign
limited liability partnership to register to do
business in this state does not impair the validity of
a contract or act of the foreign filing entity . . .

49.  Contracts
 Constructive Fraud
 Assignment of Claims
 Exclusions from Coverage
 Forum Selection Clauses
 Delaware: Pre-Merger Statements
 Delaware: Disclosure-Only Settlements
 ERISA Reimbursement
 Securities Fraud
X

50. 8. St. Luke’s Health Sys., Ltd. v. Allied World Nat’l Assur. Co., No. 1:14-CV-475-BLW,
2015 WL 5257138 (D. Idaho Sept. 4, 2015).
Section 7 of the Clayton Act violated if “the effect of such acquisition may
be substantially to lessen competition.” 15 U.S.C. § 18.

51. 8. St. Luke’s Health Sys., Ltd. v. Allied World Nat’l Assur. Co., No. 1:14-CV-475-BLW,
2015 WL 5257138 (D. Idaho Sept. 4, 2015).
“It is highly likely that St. Luke's will use its bargaining leverage over
health plan payers to receive increased reimbursements that the plans will
pass on to consumers in the form of higher health care premiums and higher
deductibles.”
Saint Alphonsus Med. Ctr. - Nampa, Inc. v. St. Luke's Health Sys., Ltd., No. 1:12-CV-00560-
BLW, 2014 WL 407446, at *25 (D. Idaho Jan. 24, 2014), affirming judgment 778 F.3d 775 (9th
Cir. 2015).
Section 7 of the Clayton Act violated if “the effect of such acquisition may
be substantially to lessen competition.” 15 U.S.C. § 18.

52. 8. St. Luke’s Health Sys., Ltd. v. Allied World Nat’l Assur. Co., No. 1:14-CV-475-BLW,
2015 WL 5257138 (D. Idaho Sept. 4, 2015).
Insurance Policy (Between St. Luke’s and Allied)
Coverage of “Antitrust Activities”
Exclusion A:
Arising out of, based upon or attributable to the gaining of any profit or
financial advantage or improper or illegal remuneration by an Insured, if a
final judgment or adjudication establishes that such Insured was not legally
entitled to such profit or advantage or that such remuneration was improper
or illegal.

53. 8. St. Luke’s Health Sys., Ltd. v. Allied World Nat’l Assur. Co., No. 1:14-CV-475-BLW,
2015 WL 5257138 (D. Idaho Sept. 4, 2015).
Exclusion A:
Arising out of, based upon or attributable to the gaining of any profit or
financial advantage or improper or illegal remuneration by an Insured, if a
final judgment or adjudication establishes that such Insured was not legally
entitled to such profit or advantage or that such remuneration was improper
or illegal.
“Bargaining Leverage” = “Financial Advantage” ?

54. 8. St. Luke’s Health Sys., Ltd. v. Allied World Nat’l Assur. Co., No. 1:14-CV-475-BLW,
2015 WL 5257138 (D. Idaho Sept. 4, 2015).
Exclusion A:
Arising out of, based upon or attributable to the gaining of any profit or
financial advantage or improper or illegal remuneration by an Insured, if a
final judgment or adjudication establishes that such Insured was not legally
entitled to such profit or advantage or that such remuneration was improper
or illegal.
“Bargaining Leverage” = “Financial Advantage” ?
“Each of the three terms in Exclusion A – profit, financial advantage, improper/illegal
remuneration – pertain to various types of monetary or financial gain.”

55. 8. St. Luke’s Health Sys., Ltd. v. Allied World Nat’l Assur. Co., No. 1:14-CV-475-BLW,
2015 WL 5257138 (D. Idaho Sept. 4, 2015).
Exclusion A:
Arising out of, based upon or attributable to the gaining of any profit or
financial advantage or improper or illegal remuneration by an Insured, if a
final judgment or adjudication establishes that such Insured was not legally
entitled to such profit or advantage or that such remuneration was improper
or illegal.
“Bargaining Leverage” = “Financial Advantage” ?
“Each of the three terms in Exclusion A – profit, financial advantage, improper/illegal
remuneration – pertain to various types of monetary or financial gain.”
Bargaining leverage  Financial advantage
Education  Employment

56. 8. St. Luke’s Health Sys., Ltd. v. Allied World Nat’l Assur. Co., No. 1:14-CV-475-BLW,
2015 WL 5257138 (D. Idaho Sept. 4, 2015).
Exclusion A:
Arising out of, based upon or attributable to the gaining of any profit or
financial advantage or improper or illegal remuneration by an Insured, if a
final judgment or adjudication establishes that such Insured was not legally
entitled to such profit or advantage or that such remuneration was improper
or illegal.
“Bargaining Leverage” = “Financial Advantage” ?
“Each of the three terms in Exclusion A – profit, financial advantage, improper/illegal
remuneration – pertain to various types of monetary or financial gain.”
Bargaining leverage  Financial advantage
Education  Employment
Appeal to 9th Circuit pending: No. 15-35767

57.  Contracts
 Constructive Fraud
 Assignment of Claims
 Exclusions from Coverage
 Forum Selection Clauses
 Delaware: Pre-Merger Statements
 Delaware: Disclosure-Only Settlements
 ERISA Reimbursement
 Securities Fraud
X

58. 5. Idaho Pacific Corp. v. Binex Line Corp., No. 4:15-CV-510-CWD, 2016 WL 843254 (D.
Idaho March 1, 2016).

59. 5. Idaho Pacific Corp. v. Binex Line Corp., No. 4:15-CV-510-CWD, 2016 WL 843254 (D.
Idaho March 1, 2016).

60. 5. Idaho Pacific Corp. v. Binex Line Corp., No. 4:15-CV-510-CWD, 2016 WL 843254 (D.
Idaho March 1, 2016).
Bill of Lading
forum selection clause = federal district court in the Central District of California

61. 5. Idaho Pacific Corp. v. Binex Line Corp., No. 4:15-CV-510-CWD, 2016 WL 843254 (D.
Idaho March 1, 2016).
Carriage of Goods by Sea Act,
46 U.S.C. § 1300
*shipments from U.S. ports to
foreign countries & vice versa
Carmack Amendment,
49 U.S.C. § 11706
*interstate cargo claims against
rail & motor carriers

62. 5. Idaho Pacific Corp. v. Binex Line Corp., No. 4:15-CV-510-CWD, 2016 WL 843254 (D.
Idaho March 1, 2016).
Carriage of Goods by Sea Act,
46 U.S.C. § 1300
*shipments from U.S. ports to
foreign countries & vice versa
Carmack Amendment,
49 U.S.C. § 11706
*interstate cargo claims against
rail & motor carriers
Because this was a through bill of lading, COGSA displaces Carmack.

63. 5. Idaho Pacific Corp. v. Binex Line Corp., No. 4:15-CV-510-CWD, 2016 WL 843254 (D.
Idaho March 1, 2016).
Atlantic Marine Constr. Co. v. U.S. Dist. Court for the W. Dist. of Texas, 134 S. Ct. 568
(2013).
Forum selection clause “given controlling weight in all but the most exceptional
circumstances.”

64. 5. Idaho Pacific Corp. v. Binex Line Corp., No. 4:15-CV-510-CWD, 2016 WL 843254 (D.
Idaho March 1, 2016).
Atlantic Marine Constr. Co. v. U.S. Dist. Court for the W. Dist. of Texas, 134 S. Ct. 568
(2013).
Forum selection clause “given controlling weight in all but the most exceptional
circumstances.”
 Party seeking to defy forum selection clause bears burden of proof.
 DO NOT give any weight to plaintiff’s choice of forum.
 DO NOT consider any of the parties’ private interests.
 ONLY consider whether any public interest factors rise to the level of exceptional
circumstances.

65. 5. Idaho Pacific Corp. v. Binex Line Corp., No. 4:15-CV-510-CWD, 2016 WL 843254 (D.
Idaho March 1, 2016).
Atlantic Marine Constr. Co. v. U.S. Dist. Court for the W. Dist. of Texas, 134 S. Ct. 568
(2013).
Forum selection clause “given controlling weight in all but the most exceptional
circumstances.”
 Party seeking to defy forum selection clause bears burden of proof.
 DO NOT give any weight to plaintiff’s choice of forum.
 DO NOT consider any of the parties’ private interests.
 ONLY consider whether any public interest factors rise to the level of exceptional
circumstances.
I.C. § 29-110. (1) Every
stipulation or condition in a
contract, by which any party
thereto is restricted from
enforcing his rights under the
contract in Idaho tribunals . . . is
void as it is against the public
policy of Idaho.

66. 5. Idaho Pacific Corp. v. Binex Line Corp., No. 4:15-CV-510-CWD, 2016 WL 843254 (D.
Idaho March 1, 2016).
Atlantic Marine Constr. Co. v. U.S. Dist. Court for the W. Dist. of Texas, 134 S. Ct. 568
(2013).
Forum selection clause “given controlling weight in all but the most exceptional
circumstances.”
 Party seeking to defy forum selection clause bears burden of proof.
 DO NOT give any weight to plaintiff’s choice of forum.
 DO NOT consider any of the parties’ private interests.
 ONLY consider whether any public interest factors rise to the level of exceptional
circumstances.
I.C. § 29-110. (1) Every
stipulation or condition in a
contract, by which any party
thereto is restricted from
enforcing his rights under the
contract in Idaho tribunals . . . is
void as it is against the public
policy of Idaho.
Complete Lack of Bargaining Power
No evidence of any bargaining
between Idaho Pacific & Binex. The
customer picked Binex & negotiated
with Binex.

67.  Contracts
 Constructive Fraud
 Assignment of Claims
 Exclusions from Coverage
 Forum Selection Clauses
 Delaware: Pre-Merger Statements
 Delaware: Disclosure-Only Settlements
 ERISA Reimbursement
 Securities Fraud
X

68. 4. RDG Logistics LLC v. A&R Logistics Holdings, Inc., 131 A.3d 842 (Del. Ch. 2016).
Buyer’s Common-Law Fraud Claims against Securityholders
re: Pre-Merger Statements
Exclusive Representations Provision
Integration Clause

69. 4. RDG Logistics LLC v. A&R Logistics Holdings, Inc., 131 A.3d 842 (Del. Ch. 2016).
Buyer’s Common-Law Fraud Claims against Securityholders
re: Pre-Merger Statements
Exclusive Representations Provision
Integration Clause
Hold
sophisticated
parties to terms
of their contracts
Protect
against abuses
of fraud

70. 4. RDG Logistics LLC v. A&R Logistics Holdings, Inc., 131 A.3d 842 (Del. Ch. 2016).
Buyer’s Common-Law Fraud Claims against Securityholders
re: Pre-Merger Statements
Exclusive Representations Provision
Integration Clause
Hold
sophisticated
parties to terms
of their contracts
Protect
against abuses
of fraud
KEY: Did party
seeking to rely on extra-
contractual statements
disclaim such reliance?

71. 4. RDG Logistics LLC v. A&R Logistics Holdings, Inc., 131 A.3d 842 (Del. Ch. 2016).
Exclusive Representations Provision
KEY: Did party
seeking to rely on extra-
contractual statements
disclaim such reliance?
5.27. EXCEPT AS EXPRESSLY SET FORTH IN THIS
ARTICLE 5, THE COMPANY MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AT LAW OR IN EQUITY AND ANY SUCH
OTHER REPRESENTATIONS OR WARRANTIES
ARE HEREBY EXPRESSLY DISCLAIMED . . .
10.7. This Agreement, the Transaction Documents and the documents referred
to herein and therein contain the entire agreement between the Parties and
supersede any prior understandings, agreements or representations by or
between the Parties, written or oral, which may have related to the subject
matter hereof in any way.
Integration Clause

72. 4. RDG Logistics LLC v. A&R Logistics Holdings, Inc., 131 A.3d 842 (Del. Ch. 2016).
KEY: Did party
seeking to rely on extra-
contractual statements
disclaim such reliance?
“[T]he critical language missing from Sections 5.27 and
10.7 of the Merger Agreement is any affirmative
expression by Buyer of
(1) specifically what it was relying on when it decided to
enter the Merger Agreement or
(2) that it is was not relying on any representations made
outside of the Merger Agreement.”

73. 4. RDG Logistics LLC v. A&R Logistics Holdings, Inc., 131 A.3d 842 (Del. Ch. 2016).
KEY: Did party
seeking to rely on extra-
contractual statements
disclaim such reliance?
“[T]he critical language missing from Sections 5.27 and
10.7 of the Merger Agreement is any affirmative
expression by Buyer of
(1) specifically what it was relying on when it decided to
enter the Merger Agreement or
(2) that it is was not relying on any representations made
outside of the Merger Agreement.”
EXAMPLE OF LANGUAGE THAT DOES THIS:
Prairie Capital III, L.P. v. Double E Holding Corp., 132
A.3d 35 (Del. Ch. Nov. 24, 2015).

74.  Contracts
 Constructive Fraud
 Assignment of Claims
 Exclusions from Coverage
 Forum Selection Clauses
 Delaware: Pre-Merger Statements
 Delaware: Disclosure-Only Settlements
 ERISA Reimbursement
 Securities Fraud
X

75. 10. In re Trulia, Inc. Stockholder Litig., 129 A.3d 884 (Del. Ch. 2016).
Heightened Scrutiny of
“Disclosure-Only”
Settlements

76. 10. In re Trulia, Inc. Stockholder Litig., 129 A.3d 884 (Del. Ch. 2016).
Heightened Scrutiny of
“Disclosure-Only”
Settlements
• “Deal tax”

77. 10. In re Trulia, Inc. Stockholder Litig., 129 A.3d 884 (Del. Ch. 2016).
Heightened Scrutiny of
“Disclosure-Only”
Settlements
• “Deal tax”
• “The most common currency used to procure a settlement is the issuance of
supplemental disclosures to the target’s stockholders before they are asked
to vote on the proposed transaction.”

78. 10. In re Trulia, Inc. Stockholder Litig., 129 A.3d 884 (Del. Ch. 2016).
Heightened Scrutiny of
“Disclosure-Only”
Settlements
• “Deal tax”
• “The most common currency used to procure a settlement is the issuance of
supplemental disclosures to the target’s stockholders before they are asked
to vote on the proposed transaction.”
• Defendants incentivized to obtain broad releases as “deal insurance.”

79. 10. In re Trulia, Inc. Stockholder Litig., 129 A.3d 884 (Del. Ch. 2016).
Heightened Scrutiny of
“Disclosure-Only”
Settlements
• “Deal tax”
• “The most common currency used to procure a settlement is the issuance of
supplemental disclosures to the target’s stockholders before they are asked
to vote on the proposed transaction.”
• Defendants incentivized to obtain broad releases as “deal insurance.”
• Plaintiffs’ attorneys incentivized by fee award.

80. 10. In re Trulia, Inc. Stockholder Litig., 129 A.3d 884 (Del. Ch. 2016).
Heightened Scrutiny of
“Disclosure-Only”
Settlements
• “Deal tax”
• “The most common currency used to procure a settlement is the issuance of
supplemental disclosures to the target’s stockholders before they are asked
to vote on the proposed transaction.”
• Defendants incentivized to obtain broad releases as “deal insurance.”
• Plaintiffs’ attorneys incentivized by fee award.
• Non-adversarial process of seeking settlement approval.

81. 10. In re Trulia, Inc. Stockholder Litig., 129 A.3d 884 (Del. Ch. 2016).
Heightened Scrutiny of
“Disclosure-Only”
Settlements
• “Deal tax”
• “The most common currency used to procure a settlement is the issuance of
supplemental disclosures to the target’s stockholders before they are asked
to vote on the proposed transaction.”
• Defendants incentivized to obtain broad releases as “deal insurance.”
• Plaintiffs’ attorneys incentivized by fee award.
• Non-adversarial process of seeking settlement approval.
“[P]ractitioners should expect that disclosure settlements are likely to be met with continued
disfavor in the future unless the supplemental disclosures address a plainly material
misrepresentation or omission, and the subject matter of the proposed release is narrowly
circumscribed to encompass nothing more than disclosure claims and fiduciary duty claims
concerning the sale process, if the record shows that such claims have been investigated
sufficiently.”

82.  Contracts
 Constructive Fraud
 Assignment of Claims
 Exclusions from Coverage
 Forum Selection Clauses
 Delaware: Pre-Merger Statements
 Delaware: Disclosure-Only Settlements
 ERISA Reimbursement
 Securities Fraud
X

83. 7. Montanile v. Bd. of Trustees of the Nat’l Elev. Indus. Health Benefit Plan, 136 S. Ct. 651
(2016).
Employee
benefits plan
Participant
Drunk driver
Covered medical expenses,
with right to reimbursement if
participant recovers money
from a third party for medical
expenses

84. 7. Montanile v. Bd. of Trustees of the Nat’l Elev. Indus. Health Benefit Plan, 136 S. Ct. 651
(2016).
Employee
benefits plan
Participant
Drunk driver
Covered medical expenses,
with right to reimbursement if
participant recovers money
from a third party for medical
expenses
Settlement

85. 7. Montanile v. Bd. of Trustees of the Nat’l Elev. Indus. Health Benefit Plan, 136 S. Ct. 651
(2016).
Employee
benefits plan
Participant
Drunk driver
Covered medical expenses,
with right to reimbursement if
participant recovers money
from a third party for medical
expenses
Settlement
Settlement funds
spent on non-
traceable items

86. 7. Montanile v. Bd. of Trustees of the Nat’l Elev. Indus. Health Benefit Plan, 136 S. Ct. 651
(2016).
ERISA § 502(a)(3) -
authorizes plan fiduciaries to bring suit “to obtain other appropriate equitable relief”

87. 7. Montanile v. Bd. of Trustees of the Nat’l Elev. Indus. Health Benefit Plan, 136 S. Ct. 651
(2016).
ERISA § 502(a)(3) -
authorizes plan fiduciaries to bring suit “to obtain other appropriate equitable relief”
Yes, equitable lien by agreement against settlement funds.

88. 7. Montanile v. Bd. of Trustees of the Nat’l Elev. Indus. Health Benefit Plan, 136 S. Ct. 651
(2016).
ERISA § 502(a)(3) -
authorizes plan fiduciaries to bring suit “to obtain other appropriate equitable relief”
Yes, equitable lien by agreement against settlement funds.
But, only equitable remedy to extent enforced against
specifically identifiable funds in the defendant’s
possession or against traceable items that the defendant
purchased with the funds.

89. 7. Montanile v. Bd. of Trustees of the Nat’l Elev. Indus. Health Benefit Plan, 136 S. Ct. 651
(2016).
ERISA § 502(a)(3) -
authorizes plan fiduciaries to bring suit “to obtain other appropriate equitable relief”
Yes, equitable lien by agreement against settlement funds.
But, only equitable remedy to extent enforced against
specifically identifiable funds in the defendant’s
possession or against traceable items that the defendant
purchased with the funds.
To extent participant spends funds on nontraceable items,
it destroys the equitable lien.

90. 7. Montanile v. Bd. of Trustees of the Nat’l Elev. Indus. Health Benefit Plan, 136 S. Ct. 651
(2016).
ERISA § 502(a)(3) -
authorizes plan fiduciaries to bring suit “to obtain other appropriate equitable relief”
Yes, equitable lien by agreement against settlement funds.
But, only equitable remedy to extent enforced against
specifically identifiable funds in the defendant’s
possession or against traceable items that the defendant
purchased with the funds.
To extent participant spends funds on nontraceable items,
it destroys the equitable lien.
Incentive to spend
on nontraceable
items
Incentive to be
vigilant in
seeking
reimbursement

91.  Contracts
 Constructive Fraud
 Assignment of Claims
 Exclusions from Coverage
 Forum Selection Clauses
 Delaware: Pre-Merger Statements
 Delaware: Disclosure-Only Settlements
 ERISA Reimbursement
 Securities FraudX

92. 2. In re ChinaCast Educ. Corp. Sec. Litig., 809 F.3d 471 (9th Cir. 2015).
Chan – Founder & CEO

93. 2. In re ChinaCast Educ. Corp. Sec. Litig., 809 F.3d 471 (9th Cir. 2015).
$$$
Chan – Founder & CEO

94. 2. In re ChinaCast Educ. Corp. Sec. Litig., 809 F.3d 471 (9th Cir. 2015).
$$$
Investors
Securities
fraud
Chan – Founder & CEO

95. 2. In re ChinaCast Educ. Corp. Sec. Litig., 809 F.3d 471 (9th Cir. 2015).
Chan – Founder & CEOSCIENTER

96. 2. In re ChinaCast Educ. Corp. Sec. Litig., 809 F.3d 471 (9th Cir. 2015).
Chan – Founder & CEOSCIENTER
General rule: imputed if corporate officer was acting “within the scope of his
employment” or “with actual or apparent authority”

97. 2. In re ChinaCast Educ. Corp. Sec. Litig., 809 F.3d 471 (9th Cir. 2015).
Chan – Founder & CEOSCIENTER
General rule: imputed if corporate officer was acting “within the scope of his
employment” or “with actual or apparent authority”
Adverse interest exception: a rogue agent’s actions or knowledge is not
imputed to the principal if the agent acts adversely to the principal in a
transaction or matter, intending to act solely for the agent’s own purposes
or those of another person

98. 2. In re ChinaCast Educ. Corp. Sec. Litig., 809 F.3d 471 (9th Cir. 2015).
Chan – Founder & CEOSCIENTER
General rule: imputed if corporate officer was acting “within the scope of his
employment” or “with actual or apparent authority”
Adverse interest exception: a rogue agent’s actions or knowledge is not
imputed to the principal if the agent acts adversely to the principal in a
transaction or matter, intending to act solely for the agent’s own purposes
or those of another person
Exception to exception: if innocent third party relies on
representations made with apparent authority.

99. 2. In re ChinaCast Educ. Corp. Sec. Litig., 809 F.3d 471 (9th Cir. 2015).
Chan – Founder & CEOSCIENTER
General rule: imputed if corporate officer was acting “within the scope of his
employment” or “with actual or apparent authority”
Adverse interest exception: a rogue agent’s actions or knowledge is not
imputed to the principal if the agent acts adversely to the principal in a
transaction or matter, intending to act solely for the agent’s own purposes
or those of another person
Exception to exception: if innocent third party relies on
representations made with apparent authority.
XSkip in
fraud-on-
the-
market
cases

100.  Contracts
 Constructive Fraud
 Assignment of Claims
 Exclusions from Coverage
 Forum Selection Clauses
 Delaware: Pre-Merger Statements
 Delaware: Disclosure-Only Settlements
 ERISA Reimbursement
 Securities FraudX

101. 9. Salman v. United States, No. 15-628 (U.S.) (pending).
Insider or
Misappropriator
Duty to disclose
or abstain from
trading

102. 9. Salman v. United States, No. 15-628 (U.S.) (pending).
Insider or
Misappropriator
Duty to disclose
or abstain from
trading
Tippee
Inherit duty?

103. 9. Salman v. United States, No. 15-628 (U.S.) (pending).
Insider or
Misappropriator
Duty to disclose
or abstain from
trading
Tippee
Inherit duty?
Dirks v. SEC, 463 U.S. 646 (1983)
*Only inherited where tipper has breached fiduciary duty by disclosing information to
tippee and tippee knows or should know that there has been such a breach.

104. 9. Salman v. United States, No. 15-628 (U.S.) (pending).
Insider or
Misappropriator
Duty to disclose
or abstain from
trading
Tippee
Inherit duty?
Dirks v. SEC, 463 U.S. 646 (1983)
*Only inherited where tipper has breached fiduciary duty by disclosing information to
tippee and tippee knows or should know that there has been such a breach.
Dirks v. SEC, 463 U.S. 646 (1983)
*The test for whether the tipper breached fiduciary duty is whether the tipper will
benefit, directly or indirectly, from the disclosure.

105. 9. Salman v. United States, No. 15-628 (U.S.) (pending).
Insider or
Misappropriator
Duty to disclose
or abstain from
trading
Tippee
Inherit duty?
Dirks v. SEC, 463 U.S. 646 (1983)
*Only inherited where tipper has breached fiduciary duty by disclosing information to
tippee and tippee knows or should know that there has been such a breach.
Dirks v. SEC, 463 U.S. 646 (1983)
*The test for whether the tipper breached fiduciary duty is whether the tipper will
benefit, directly or indirectly, from the disclosure.
Dirks v. SEC, 463 U.S. 646 (1983)
*“The elements of fiduciary duty and exploitation of nonpublic information also exist
when [a tipper] makes a gift of confidential information to a trading relative or friend.
The tip and trade resemble trading by [the tipper] himself followed by a gift of the profits
to the recipient.”

106. 9. Salman v. United States, No. 15-628 (U.S.) (pending).
Dirks v. SEC, 463 U.S. 646 (1983)
*“The elements of fiduciary duty and exploitation of nonpublic information also exist
when [a tipper] makes a gift of confidential information to a trading relative or friend.
The tip and trade resemble trading by [the tipper] himself followed by a gift of the profits
to the recipient.”
Second Circuit (Newman):
Requires “proof of a meaningfully close personal
relationship that generates an exchange that is
objective, consequential, and represents at least a
potential gain of a pecuniary or similarly
valuable nature.”

107. 9. Salman v. United States, No. 15-628 (U.S.) (pending).
Dirks v. SEC, 463 U.S. 646 (1983)
*“The elements of fiduciary duty and exploitation of nonpublic information also exist
when [a tipper] makes a gift of confidential information to a trading relative or friend.
The tip and trade resemble trading by [the tipper] himself followed by a gift of the profits
to the recipient.”
Second Circuit (Newman):
Requires “proof of a meaningfully close personal
relationship that generates an exchange that is
objective, consequential, and represents at least a
potential gain of a pecuniary or similarly
valuable nature.”
Ninth Circuit (Salman):
Proof of “intent to benefit a
trading relative or friend” is
sufficient.”

108. 9. Salman v. United States, No. 15-628 (U.S.) (pending).
Dirks v. SEC, 463 U.S. 646 (1983)
*“The elements of fiduciary duty and exploitation of nonpublic information also exist
when [a tipper] makes a gift of confidential information to a trading relative or friend.
The tip and trade resemble trading by [the tipper] himself followed by a gift of the profits
to the recipient.”
Second Circuit (Newman):
Requires “proof of a meaningfully close personal
relationship that generates an exchange that is
objective, consequential, and represents at least a
potential gain of a pecuniary or similarly
valuable nature.”
Ninth Circuit (Salman):
Proof of “intent to benefit a
trading relative or friend” is
sufficient.”
Cert Granted on Question:
“Does the personal benefit to the insider that is necessary to establish
insider trading under Dirks require proof of ‘an exchange that is objective,
consequential, and represents at least a potential gain of a pecuniary or
similarly valuable nature,’ as the Second Circuit held in Newman, or is it
enough that the insider and the tippee shared a close family relationship, as
the Ninth Circuit held in this case?

109. Thank you!
Wendy Gerwick Couture
Associate Professor of Law
University of Idaho
***Slides posted on SlideShare.