Presented on May 11, 2018 at the Idaho State Bar, Business & Corporate Law Section's Annual Meeting

1. Top 10 Business Law Cases of the Year
May 11, 2018
Wendy Gerwick Couture
Professor of Law
University of Idaho

2.  Oral Agreements
 Ambiguous Contracts
 Breach of Fiduciary
Duty Claims
 Confusing Federal
Securities Statutes

3.  Oral Agreements
 Ambiguous Contracts
 Breach of Fiduciary
Duty Claims
 Confusing Federal
Securities Statutes
X

4. Bailey v. Peritus I Assets Mgmt, LLC, 162 Idaho 458, 398 P.3d 191 (2017).
Bailey
AMF,
Inc.
Peritus I
Assets
Mgmt,
LLC
Breach of
oral
employment
K

5. Bailey
AMF,
Inc.
Peritus I
Assets
Mgmt,
LLC
Breach of
oral
employment
K
$$$
2004-present - FUNDING
• Formed PGO Fund as vehicle for clients to invest in AMF.
• AMF Fund extended a bridge loan to AMF, secured by
AMF’s founders’AMF shares.
• Post-default, PGO Fund became owner of 90% of AMF’s
stock.
• PGO Fund dissolved & distributed shares to Peritus clients.
• Peritus then began loaning funds to AMF on condition of
representation on board.
Bailey v. Peritus I Assets Mgmt, LLC, 162 Idaho 458, 398 P.3d 191 (2017).

6. 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:
1. An agreement that by its terms is
not to be performed within a year
from the making thereof.
2. A special promise to answer for
the debt, default or miscarriage of
another, except in the cases
provided for in section 9-506,
Idaho Code.
. . .
Bailey v. Peritus I Assets Mgmt, LLC, 162 Idaho 458, 398 P.3d 191 (2017).

7. 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:
1. An agreement that by its terms is
not to be performed within a year
from the making thereof.
2. A special promise to answer for
the debt, default or miscarriage of
another, except in the cases
provided for in section 9-506,
Idaho Code.
. . .
Vacate & remand. “The allegations in this
case are not that a collateral promise was
made to assume the debt of another, but
instead that multiple debtors are jointly
liable for an original obligation as
principals.”
Bailey v. Peritus I Assets Mgmt, LLC, 162 Idaho 458, 398 P.3d 191 (2017).

8. 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:
1. An agreement that by its terms is
not to be performed within a year
from the making thereof.
2. A special promise to answer for the
debt, default or miscarriage of
another, except in the cases
provided for in section 9-506, Idaho
Code.
. . .
Vacate & remand. “The allegations in this
case are not that a collateral promise was
made to assume the debt of another, but
instead that multiple debtors are jointly
liable for an original obligation as
principals.”
 Bailey’s testimony about pre-employment
discussions with Peritus reps who “said they
would pay [Bailey]” because AMF was
underfunded.
 Bailey’s testimony that one “stipulation” of
coming aboard was that “Peritus be
responsible for paying [him].”
Bailey v. Peritus I Assets Mgmt, LLC, 162 Idaho 458, 398 P.3d 191 (2017).

9. 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:
1. An agreement that by its terms is
not to be performed within a year
from the making thereof.
2. A special promise to answer for the
debt, default or miscarriage of
another, except in the cases
provided for in section 9-506, Idaho
Code.
. . .
Vacate & remand. “The allegations in this
case are not that a collateral promise was
made to assume the debt of another, but
instead that multiple debtors are jointly
liable for an original obligation as
principals.”
 Bailey’s testimony about pre-employment
discussions with Peritus reps who “said they
would pay [Bailey]” because AMF was
underfunded.
 Bailey’s testimony that one “stipulation” of
coming aboard was that “Peritus be
responsible for paying [him].”
 Unsigned employment offer letter with
signature blocks for Peritus reps but not
anyone from AMF.
 Later written employment contract signed by
Peritus reps.
Bailey v. Peritus I Assets Mgmt, LLC, 162 Idaho 458, 398 P.3d 191 (2017).

10.  Oral Agreements
 Ambiguous Contracts
 Breach of Fiduciary
Duty Claims
 Confusing Federal
Securities Statutes
X

11. Johnson v. Crossett, 163 Idaho 200, 408 P.3d 1272 (2018).
Johnson
Brother-in-
Law

12. Johnson CrossettOral Agreement
Brother-in-
Law
Johnson v. Crossett, 163 Idaho 200, 408 P.3d 1272 (2018).

13. Johnson CrossettOral Agreement
Brother-in-
Law
Drug Testing
Compliance
Group, LLC
(“DTC”)
Crossett
Johnson v. Crossett, 163 Idaho 200, 408 P.3d 1272 (2018).

14. Johnson CrossettOral Agreement
Brother-in-
Law
Drug Testing
Compliance
Group, LLC
(“DTC”)
Crossett
Written Operating Agreement
Johnson v. Crossett, 163 Idaho 200, 408 P.3d 1272 (2018).

15. Johnson CrossettOral Agreement
Brother-in-
Law
Drug Testing
Compliance
Group, LLC
(“DTC”)
Crossett
Written Operating Agreement
Johnson
Johnson v. Crossett, 163 Idaho 200, 408 P.3d 1272 (2018).

16. Johnson CrossettOral Agreement
Brother-in-
Law
Drug Testing
Compliance
Group, LLC
(“DTC”)
Crossett
Written Operating Agreement
Johnson
District court: Johnson was
never a member.
Johnson v. Crossett, 163 Idaho 200, 408 P.3d 1272 (2018).

17. I.C. § 30-25-102(9) (now); I.C. § 30-6-102(15) (then).
“Operating agreement” means the agreement, whether or not referred to as an operating
agreement and whether oral, implied, in a record, or in any combination thereof, of all the
members of a limited liability company, including a sole member, concerning the matters
described in section 30-25-105(a), Idaho Code.
Johnson v. Crossett, 163 Idaho 200, 408 P.3d 1272 (2018).

18. I.C. § 30-25-102(9) (now); I.C. § 30-6-102(15) (then)
“Operating agreement” means the agreement, whether or not referred to as an operating
agreement and whether oral, implied, in a record, or in any combination thereof, of all the
members of a limited liability company, including a sole member, concerning the matters
described in section 30-25-105(a), Idaho Code.
Supreme Court:
No, the district court determined that the Oral Agreement was valid. But, the district
court also determined that the Oral Agreement included the following term:
• that Johnson would become a member only upon signing the Written
Agreement.
Johnson v. Crossett, 163 Idaho 200, 408 P.3d 1272 (2018).

19. I.C. § 30-25-102(9) (now); I.C. § 30-6-102(15) (then)
“Operating agreement” means the agreement, whether or not referred to as an operating
agreement and whether oral, implied, in a record, or in any combination thereof, of all the
members of a limited liability company, including a sole member, concerning the matters
described in section 30-25-105(a), Idaho Code.
Supreme Court:
No, the district court determined that the Oral Agreement was valid. But, the district
court also determined that the Oral Agreement included the following term:
• that Johnson would become a member only upon signing the Written
Agreement.
“The district court made clear that it was not the mere drafting of the Written
Agreement, in the abstract, that undermined the Oral Agreement; rather, per
the Oral Agreement, once the Written Agreement was ready to be signed,
Appellants could only become members by signing.”
Johnson v. Crossett, 163 Idaho 200, 408 P.3d 1272 (2018).

20.  Oral Agreements
 Ambiguous Contracts
 Breach of Fiduciary
Duty Claims
 Confusing Federal
Securities Statutes
X

21. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Arbon Valley Solar LLC
Interconnect Solar
Development LLC

22. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Arbon Valley Solar LLC
Interconnect Solar
Development LLC

23. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Arbon Valley Solar LLC
Interconnect Solar
Development LLC
Germany
Oral Agreement
• Germany to provide
(1) contractual
oversight, (2) project
management, & (3)
engineer procurement
for the Solar Power
Project.
• Plaintiffs tendered
$50K, to be deposited
in escrow account
maintained by Sunjoy
Power, LLC.

24. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Arbon Valley Solar LLC
Interconnect Solar
Development LLC
Germany
Oral Agreement
• Germany to provide
(1) contractual
oversight, (2) project
management, & (3)
engineer procurement
for the Solar Power
Project.
• Plaintiffs tendered
$50K, to be deposited
in escrow account
maintained by Sunjoy
Power, LLC.
Thomas & Betts Corp.

25. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Actual Authority
• Express - principal expressly grants agent permission
to act in principal’s name.
• Implied – any authority necessary to accomplish
express authority that principal delegated.

26. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Actual Authority
• Express - principal expressly grants agent permission
to act in principal’s name.
• Implied – any authority necessary to accomplish
express authority that principal delegated.
Apparent Authority
• Authority granted based on
principal’s words & conduct toward
third party, not the agent’s acts &
statements to third party

27. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Actual Authority
• Express - principal expressly grants agent permission
to act in principal’s name.
• Implied – any authority necessary to accomplish
express authority that principal delegated.
Apparent Authority
• Authority granted based on
principal’s words & conduct toward
third party, not the agent’s acts &
statements to third party
 Germany used Thomas & Betts computers, email addresses, & telephones.

28. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Actual Authority
• Express - principal expressly grants agent permission
to act in principal’s name.
• Implied – any authority necessary to accomplish
express authority that principal delegated.
Apparent Authority
• Authority granted based on
principal’s words & conduct toward
third party, not the agent’s acts &
statements to third party
 Germany used Thomas & Betts computers, email addresses, & telephones.
 Germany’s Thomas & Betts business card & Thomas & Betts’ website identified him as
“Market Development Manager of Renewable Energy and Power Generation for the
United States and Latin America.”

29. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Actual Authority
• Express - principal expressly grants agent permission
to act in principal’s name.
• Implied – any authority necessary to accomplish
express authority that principal delegated.
Apparent Authority
• Authority granted based on
principal’s words & conduct toward
third party, not the agent’s acts &
statements to third party
 Germany used Thomas & Betts computers, email addresses, & telephones.
 Germany’s Thomas & Betts business card & Thomas & Betts’ website identified him as
“Market Development Manager of Renewable Energy and Power Generation for the
United States and Latin America.”
 Plaintiffs’ paid $50K to Germany, to be deposited in escrow account maintained by
Sunjoy Power, L.L.C., which Germany represented was a subsidiary of Thomas & Betts.

30. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Actual Authority
• Express - principal expressly grants agent permission
to act in principal’s name.
• Implied – any authority necessary to accomplish
express authority that principal delegated.
Apparent Authority
• Authority granted based on
principal’s words & conduct toward
third party, not the agent’s acts &
statements to third party
 Germany used Thomas & Betts computers, email addresses, & telephones.
 Germany’s Thomas & Betts business card & Thomas & Betts’ website identified him as
“Market Development Manager of Renewable Energy and Power Generation for the
United States and Latin America.”
 Plaintiffs’ paid $50K to Germany, to be deposited in escrow account maintained by
Sunjoy Power, L.L.C., which Germany represented was a subsidiary of Thomas & Betts.
 Plaintiffs & Germany met with another Thomas & Betts employee in Boise to discuss
Solar Power Project.

31. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Ratification
• Affirmance by a person of a prior act which did not
bind him but which was done or professedly done on
his account, whereby the act as to some or all
persons, is given effect as if originally authorized by
him.

32. Arbon Valley Solar LLC v. Thomas & Betts Corp., No. 4:16-CV-70-DCN, 2017 WL
5613009 (D. Idaho Nov. 21, 2017) (Nye, J.).
Ratification
• Affirmance by a person of a prior act which did not
bind him but which was done or professedly done on
his account, whereby the act as to some or all
persons, is given effect as if originally authorized by
him.
 Plaintiffs & Germany met with another Thomas & Betts employee in Boise to discuss
Solar Power Project.
 Two emails copied or forwarded to alleged high-level execs at Thomas & Betts.

33.  Oral Agreements
 Ambiguous Contracts
 Breach of Fiduciary
Duty Claims
 Confusing Federal
Securities Statutes
X

34. Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).
Nield, Inc.
Kunz
1996 Contract
o Kunz entitled to 80%
monthly commissions.
o Kunz not entitled to profit-
sharing (a/k/a “contingent
commissions”), which are
paid annually.

35. Nield, Inc.
Kunz
Nield, Inc.
Kunz
1996 Contract
o Kunz entitled to 80%
monthly commissions.
o Kunz not entitled to profit-
sharing (a/k/a “contingent
commissions”), which are
paid annually.
2009 Contract
o Kunz entitled to 80%
monthly commissions.
o Dispute about whether
Kunz entitled to profit-
sharing &, if so, at what
percentage.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

36. Nield, Inc.
Kunz
Nield, Inc.
Kunz
1996 Contract
o Kunz entitled to 80%
monthly commissions.
o Kunz not entitled to profit-
sharing (a/k/a “contingent
commissions”), which are
paid annually.
2009 Contract
o Kunz entitled to 80%
monthly commissions.
o Dispute about whether
Kunz entitled to profit-
sharing &, if so, at what
percentage.
• According to Kunz, one of Nield’s owners mentioned profit-sharing in the lead up to 2009
Contract and presented Kunz with a draft contract containing a profit-sharing provision.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

37. Nield, Inc.
Kunz
Nield, Inc.
Kunz
1996 Contract
o Kunz entitled to 80%
monthly commissions.
o Kunz not entitled to profit-
sharing (a/k/a “contingent
commissions”), which are
paid annually.
2009 Contract
o Kunz entitled to 80%
monthly commissions.
o Dispute about whether
Kunz entitled to profit-
sharing &, if so, at what
percentage.
• According to Kunz, one of Nield’s owners mentioned profit-sharing in the lead up to 2009
Contract and presented Kunz with a draft contract containing a profit-sharing provision.
• In 2009, Kunz received a check from Nield for 2008 business done with Gem State.
• In 2011, Kunz received a check from Nield for 2010 business done with Gem State &
Acuity.
• In 2012, Kunz received a check from Nield for 2011 work business done with Gem State &
Farmers Alliance.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

38. Nield, Inc.
Kunz
Nield, Inc.
Kunz
1996 Contract
o Kunz entitled to 80%
monthly commissions.
o Kunz not entitled to profit-
sharing (a/k/a “contingent
commissions”), which are
paid annually.
2009 Contract
o Kunz entitled to 80%
monthly commissions.
o Dispute about whether
Kunz entitled to profit-
sharing &, if so, at what
percentage.
• According to Kunz, one of Nield’s owners mentioned profit-sharing in the lead up to 2009
Contract and presented Kunz with a draft contract containing a profit-sharing provision.
• In 2009, Kunz received a check from Nield for 2008 business done with Gem State.
• In 2011, Kunz received a check from Nield for 2010 business done with Gem State &
Acuity.
• In 2012, Kunz received a check from Nield for 2011 work business done with Gem State &
Farmers Alliance.
• In 2013, Kunz received a check from Nield with the notation “Profit Sharing 2012.”
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

39. Nield, Inc.
Kunz
1996 Contract
o Kunz entitled to 80%
monthly commissions.
o Kunz not entitled to profit-
sharing (a/k/a “contingent
commissions”), which are
paid annually.
Nield, Inc.
Kunz
2009 Contract
o Kunz entitled to 80%
monthly commissions.
o Dispute about whether
Kunz entitled to profit-
sharing &, if so, at what
percentage.
District Court
• The 2009 Contract’s usage of the term “commissions” was
ambiguous &, based on a review of extrinsic evidence, did not
include profit-sharing.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

40. Nield, Inc.
Kunz
1996 Contract
o Kunz entitled to 80%
monthly commissions.
o Kunz not entitled to profit-
sharing (a/k/a “contingent
commissions”), which are
paid annually.
Nield, Inc.
Kunz
2009 Contract
o Kunz entitled to 80%
monthly commissions.
o Dispute about whether
Kunz entitled to profit-
sharing &, if so, at what
percentage.
District Court
• The 2009 Contract’s usage of the term “commissions” was
ambiguous &, based on a review of extrinsic evidence, did not
include profit-sharing.
• The 2009 Contract was not integrated & not intended to be the final
expression of the parties’ agreement.
• The parties had a separate 50-50 profit-sharing agreement only with
respect to business written with Gem State.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

41. District Court
• The 2009 Contract’s usage of the term “commissions” was
ambiguous &, based on a review of extrinsic evidence, did not
include profit-sharing.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

42. 2009 Contract
(6) Responsibilities of Company: Company will
maintain contracts with companies for placing of
insurances. Company will do all billing and
accounting functions (except collections). Agent is
personally responsible for the collection of
premiums and returned commissions on business
placed.... [provide Bret with a commission check
based on agreed percentages on the 15th of each
month, and other functions based upon
commission split and individual agreement].
(7) Terms of Compensation: Agent will receive 80
percent of commissions received on insurance
placed by agent with company. Company will
receive 20 percent of commission placed by agent
with company.
District Court
• The 2009 Contract’s usage of the term “commissions” was
ambiguous &, based on a review of extrinsic evidence, did not
include profit-sharing.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

43. “The term ‘commission’ is ambiguous
because it is not defined by the 2009
Contract and has multiple reasonable
definitions in the insurance industry
including monthly commissions and
annual contingent commissions.”
District Court
• The 2009 Contract’s usage of the term “commissions” was
ambiguous &, based on a review of extrinsic evidence, did not
include profit-sharing.
2009 Contract
(6) Responsibilities of Company: Company will
maintain contracts with companies for placing of
insurances. Company will do all billing and
accounting functions (except collections). Agent is
personally responsible for the collection of
premiums and returned commissions on business
placed.... [provide Bret with a commission check
based on agreed percentages on the 15th of each
month, and other functions based upon
commission split and individual agreement].
(7) Terms of Compensation: Agent will receive 80
percent of commissions received on insurance
placed by agent with company. Company will
receive 20 percent of commission placed by agent
with company.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

44. “The determination of the parties’ intent is
to be determined by looking at
• the contract as a whole,
• the language used in the document,
• the circumstances under which it was
made,
• the objective and purpose of the
particular provisions, and
• any construction placed upon it by the
contracting parties as shown by their
conduct or dealings.”
District Court
• The 2009 Contract’s usage of the term “commissions” was
ambiguous &, based on a review of extrinsic evidence, did not
include profit-sharing.
2009 Contract
(6) Responsibilities of Company: Company will
maintain contracts with companies for placing of
insurances. Company will do all billing and
accounting functions (except collections). Agent is
personally responsible for the collection of
premiums and returned commissions on business
placed.... [provide Bret with a commission check
based on agreed percentages on the 15th of each
month, and other functions based upon
commission split and individual agreement].
(7) Terms of Compensation: Agent will receive 80
percent of commissions received on insurance
placed by agent with company. Company will
receive 20 percent of commission placed by agent
with company.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

45. • Paragraph (6) only talks about
commissions being paid monthly.
Since profit-sharing commissions are
paid annually, “commissions” must
not include profit-sharing.
District Court
• The 2009 Contract’s usage of the term “commissions” was
ambiguous &, based on a review of extrinsic evidence, did not
include profit-sharing.
2009 Contract
(6) Responsibilities of Company: Company will
maintain contracts with companies for placing of
insurances. Company will do all billing and
accounting functions (except collections). Agent is
personally responsible for the collection of
premiums and returned commissions on business
placed.... [provide Bret with a commission check
based on agreed percentages on the 15th of each
month, and other functions based upon
commission split and individual agreement].
(7) Terms of Compensation: Agent will receive 80
percent of commissions received on insurance
placed by agent with company. Company will
receive 20 percent of commission placed by agent
with company.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

46. • Paragraph (6) only talks about
commissions being paid monthly.
Since profit-sharing commissions are
paid annually, “commissions” must
not include profit-sharing.
• Nield’s owner’s alleged statements
about profit-sharing are of limited
value because there was no evidence
that an oral agreement was reached.
District Court
• The 2009 Contract’s usage of the term “commissions” was
ambiguous &, based on a review of extrinsic evidence, did not
include profit-sharing.
2009 Contract
(6) Responsibilities of Company: Company will
maintain contracts with companies for placing of
insurances. Company will do all billing and
accounting functions (except collections). Agent is
personally responsible for the collection of
premiums and returned commissions on business
placed.... [provide Bret with a commission check
based on agreed percentages on the 15th of each
month, and other functions based upon
commission split and individual agreement].
(7) Terms of Compensation: Agent will receive 80
percent of commissions received on insurance
placed by agent with company. Company will
receive 20 percent of commission placed by agent
with company.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

47. • Paragraph (6) only talks about
commissions being paid monthly.
Since profit-sharing commissions are
paid annually, “commissions” must
not include profit-sharing.
• Nield’s owner’s alleged statements
about profit-sharing are of limited
value because there was no evidence
that an oral agreement was reached.
• Because these factors were sufficient
to determine the intentions of the
parties, it was not necessary to
interpret the 2009 Contract against the
drafter (Nield).
District Court
• The 2009 Contract’s usage of the term “commissions” was
ambiguous &, based on a review of extrinsic evidence, did not
include profit-sharing.
2009 Contract
(6) Responsibilities of Company: Company will
maintain contracts with companies for placing of
insurances. Company will do all billing and
accounting functions (except collections). Agent is
personally responsible for the collection of
premiums and returned commissions on business
placed.... [provide Bret with a commission check
based on agreed percentages on the 15th of each
month, and other functions based upon
commission split and individual agreement].
(7) Terms of Compensation: Agent will receive 80
percent of commissions received on insurance
placed by agent with company. Company will
receive 20 percent of commission placed by agent
with company.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

48. District Court
• The 2009 Contract was not integrated & not intended to be the final
expression of the parties’ agreement.
• The parties had a separate 50-50 profit-sharing agreement only with
respect to business written with Gem State.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

49. District Court
• The 2009 Contract was not integrated & not intended to be the final
expression of the parties’ agreement.
• The parties had a separate 50-50 profit-sharing agreement only with
respect to business written with Gem State.
“The crux of the Kunzes’ argument is that the district court erred by importing the
incorrect percentage split from the 2009 Contract to the implied in fact contract.”
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

50. “The crux of the Kunzes’ argument is that the district court erred by importing the
incorrect percentage split from the 2009 Contract to the implied in fact contract.
This position is undermined by two of the district court’s findings.
First, the district court found that the profit sharing split for the implied in fact
contract stemmed from the parties’ course of conduct. . . .”
District Court
• The 2009 Contract was not integrated & not intended to be the final
expression of the parties’ agreement.
• The parties had a separate 50-50 profit-sharing agreement only with
respect to business written with Gem State.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

51. “The crux of the Kunzes’ argument is that the district court erred by importing the
incorrect percentage split from the 2009 Contract to the implied in fact contract.
This position is undermined by two of the district court’s findings.
First, the district court found that the profit sharing split for the implied in fact
contract stemmed from the parties’ course of conduct. . . .
Second, the district court found that the 2009 Contract did not provide for profit
sharing.”
District Court
• The 2009 Contract was not integrated & not intended to be the final
expression of the parties’ agreement.
• The parties had a separate 50-50 profit-sharing agreement only with
respect to business written with Gem State.
Kunz v. Nield, Inc., 162 Idaho 432, 398 P.3d 165 (2017).

52.  Oral Agreements
 Ambiguous Contracts
 Breach of Fiduciary
Duty Claims
 Confusing Federal
Securities Statutes
X

53. Clear Wireless, LLC v. Mountain State Cellular, Inc., No. 1:16-CV-2-CDW, 2017 WL
2039172 (D. Idaho May 12, 2017) (Dale, M.J.).
Clear Wireless, LLC Mountain State Cellular, Inc.APA

54. Clear Wireless, LLC v. Mountain State Cellular, Inc., No. 1:16-CV-2-CDW, 2017 WL
2039172 (D. Idaho May 12, 2017) (Dale, M.J.).
Clear Wireless, LLC Mountain State Cellular, Inc.APA
2.4 Inventory. Buyer will purchase from Seller
at pricing commensurate with—current Indirect
pricing, all new, current and marketable
Verizon Wireless cellular telephone units,
merchandise, goods, equipment & accessories
for future sale, in the ordinary of business—on
the closing date of December 1, 2014 or earlier.

55. Clear Wireless, LLC v. Mountain State Cellular, Inc., No. 1:16-CV-2-CDW, 2017 WL
2039172 (D. Idaho May 12, 2017) (Dale, M.J.).
Clear Wireless, LLC Mountain State Cellular, Inc.APA
2.4 Inventory. Buyer will purchase from Seller
at pricing commensurate with—current Indirect
pricing, all new, current and marketable
Verizon Wireless cellular telephone units,
merchandise, goods, equipment & accessories
for future sale, in the ordinary of business—on
the closing date of December 1, 2014 or earlier.
3.2 Inventory. Subject to . . ., all phone &
accessory inventory will be deemed
marketable & appropriate by Buyer & shall
be preliminarily valued cooperatively
between Buyer and Seller within 3 business
days prior to closing. After closing and within
3 business days thereafter, Buyer will pay Seller
for all inventory, separate from purchase price
above.

56. Clear Wireless, LLC v. Mountain State Cellular, Inc., No. 1:16-CV-2-CDW, 2017 WL
2039172 (D. Idaho May 12, 2017) (Dale, M.J.).
Clear Wireless, LLC Mountain State Cellular, Inc.APA
2.4 Inventory. Buyer will purchase from Seller
at pricing commensurate with—current Indirect
pricing, all new, current and marketable
Verizon Wireless cellular telephone units,
merchandise, goods, equipment & accessories
for future sale, in the ordinary of business—on
the closing date of December 1, 2014 or earlier.
3.2 Inventory. Subject to . . ., all phone &
accessory inventory will be deemed
marketable & appropriate by Buyer & shall
be preliminarily valued cooperatively
between Buyer and Seller within 3 business
days prior to closing. After closing and within
3 business days thereafter, Buyer will pay Seller
for all inventory, separate from purchase price
above.
 Clear provided Mountain State
access to its POS system. Around
14-18 Mountain State employees
traveled to Arizona to do a physical
inventory.

57. Clear Wireless, LLC v. Mountain State Cellular, Inc., No. 1:16-CV-2-CDW, 2017 WL
2039172 (D. Idaho May 12, 2017) (Dale, M.J.).
Clear Wireless, LLC Mountain State Cellular, Inc.APA
2.4 Inventory. Buyer will purchase from Seller
at pricing commensurate with—current Indirect
pricing, all new, current and marketable
Verizon Wireless cellular telephone units,
merchandise, goods, equipment & accessories
for future sale, in the ordinary of business—on
the closing date of December 1, 2014 or earlier.
3.2 Inventory. Subject to . . ., all phone &
accessory inventory will be deemed
marketable & appropriate by Buyer & shall
be preliminarily valued cooperatively
between Buyer and Seller within 3 business
days prior to closing. After closing and within
3 business days thereafter, Buyer will pay Seller
for all inventory, separate from purchase price
above.
 Clear provided Mountain State access
to its POS system. Around 14-18
Mountain State employees traveled to
Arizona to do a physical inventory.
 Mountain State left marketable
inventory in the stores & shipped
the remainder to Boise for final
evaluation.

58. Clear Wireless, LLC v. Mountain State Cellular, Inc., No. 1:16-CV-2-CDW, 2017 WL
2039172 (D. Idaho May 12, 2017) (Dale, M.J.).
Clear Wireless, LLC Mountain State Cellular, Inc.APA
2.4 Inventory. Buyer will purchase from Seller
at pricing commensurate with—current Indirect
pricing, all new, current and marketable
Verizon Wireless cellular telephone units,
merchandise, goods, equipment & accessories
for future sale, in the ordinary of business—on
the closing date of December 1, 2014 or earlier.
3.2 Inventory. Subject to . . ., all phone &
accessory inventory will be deemed
marketable & appropriate by Buyer & shall
be preliminarily valued cooperatively
between Buyer and Seller within 3 business
days prior to closing. After closing and within
3 business days thereafter, Buyer will pay Seller
for all inventory, separate from purchase price
above.
 Clear provided Mountain State access
to its POS system. Around 14-18
Mountain State employees traveled to
Arizona to do a physical inventory.
 Mountain State left marketable
inventory in the stores & shipped the
remainder to Boise for final
evaluation.
 On Dec. 3, 2014, Mountain State
offered to pay $396K. Email stated:
“I sent a wire for 396k for the
‘preliminary’ inventory dollar
amount. I know we have some
truing up to do over the next week.”

59. Clear Wireless, LLC v. Mountain State Cellular, Inc., No. 1:16-CV-2-CDW, 2017 WL
2039172 (D. Idaho May 12, 2017) (Dale, M.J.).
Clear Wireless, LLC Mountain State Cellular, Inc.APA
2.4 Inventory. Buyer will purchase from Seller
at pricing commensurate with—current Indirect
pricing, all new, current and marketable
Verizon Wireless cellular telephone units,
merchandise, goods, equipment & accessories
for future sale, in the ordinary of business—on
the closing date of December 1, 2014 or earlier.
3.2 Inventory. Subject to . . ., all phone &
accessory inventory will be deemed
marketable & appropriate by Buyer & shall
be preliminarily valued cooperatively
between Buyer and Seller within 3 business
days prior to closing. After closing and within
3 business days thereafter, Buyer will pay Seller
for all inventory, separate from purchase price
above.
 Clear provided Mountain State access
to its POS system. Around 14-18
Mountain State employees traveled to
Arizona to do a physical inventory.
 Mountain State left marketable
inventory in the stores & shipped the
remainder to Boise for final evaluation.
 On Dec. 3, 2014, Mountain State
offered to pay $396K. Email stated: “I
sent a wire for 396k for the
‘preliminary’ inventory dollar amount. I
know we have some truing up to do
over the next week.”
 Ultimately, Mountain State
determined that the marketable
inventory was worth $55K less and
deducted it from a later scheduled
payment of the purchase price.

60. Clear Wireless, LLC v. Mountain State Cellular, Inc., No. 1:16-CV-2-CDW, 2017 WL
2039172 (D. Idaho May 12, 2017) (Dale, M.J.).
Clear Wireless, LLC Mountain State Cellular, Inc.APA
2.4 Inventory. Buyer will purchase from Seller
at pricing commensurate with—current Indirect
pricing, all new, current and marketable
Verizon Wireless cellular telephone units,
merchandise, goods, equipment & accessories
for future sale, in the ordinary of business—on
the closing date of December 1, 2014 or earlier.
3.2 Inventory. Subject to . . ., all phone &
accessory inventory will be deemed
marketable & appropriate by Buyer & shall
be preliminarily valued cooperatively
between Buyer and Seller within 3 business
days prior to closing. After closing and within
3 business days thereafter, Buyer will pay Seller
for all inventory, separate from purchase price
above.
“Specifically, ambiguity exists
regarding how the parties
extrapolate from the preliminary
valuation of marketable inventory
to the payment for all inventory
due three days after closing.
Ambiguities exist as to whether
the payment was final and what
type of inventory (marketable or
all inventory) the Dec. 3, 2014
payment included.”

61. Clear Wireless, LLC v. Mountain State Cellular, Inc., No. 1:16-CV-2-CDW, 2017 WL
2039172 (D. Idaho May 12, 2017) (Dale, M.J.).
Clear Wireless, LLC Mountain State Cellular, Inc.APA
Findings of Fact & Conclusions of Law – Aug. 8, 2017
• December 3, 2014 inventory payment was for marketable & saleable inventory only.
• The December 3, 2014 inventory payment was final.
• The APA did not provide for later set-off.
• Mountain State’s breach of the APA caused damages to Clear in the amount of $55K.

62. Clear Wireless, LLC v. Mountain State Cellular, Inc., No. 1:16-CV-2-CDW, 2017 WL
2039172 (D. Idaho May 12, 2017) (Dale, M.J.).
Clear Wireless, LLC Mountain State Cellular, Inc.APA
Findings of Fact & Conclusions of Law – Aug. 8, 2017
• December 3, 2014 inventory payment was for marketable & saleable inventory only.
• The December 3, 2014 inventory payment was final.
• The APA did not provide for later set-off.
• Mountain State’s breach of the APA caused damages to Clear in the amount of $55K.
12.1.16 All Due Diligence Materials and
other data and information regarding the
Business provided by Seller and
disclosed to Buyer shall be and is
certified and confirmed by Seller to be
true, accurate and correct, without
exception, as of the Effective Date and as
of the Closing Date.

63. Clear Wireless, LLC v. Mountain State Cellular, Inc., No. 1:16-CV-2-CDW, 2017 WL
2039172 (D. Idaho May 12, 2017) (Dale, M.J.).
Clear Wireless, LLC Mountain State Cellular, Inc.APA
Findings of Fact & Conclusions of Law – Aug. 8, 2017
• December 3, 2014 inventory payment was for marketable & saleable inventory only.
• The December 3, 2014 inventory payment was final.
• The APA did not provide for later set-off.
• Mountain State’s breach of the APA caused damages to Clear in the amount of $55K.
• The fact that Clear’s valuation was higher than Mountain State’s is not a breach
of the due diligence provision because whether inventory is marketable &
saleable varies between agents & because valuation is subjective.
12.1.16 All Due Diligence Materials and
other data and information regarding the
Business provided by Seller and
disclosed to Buyer shall be and is
certified and confirmed by Seller to be
true, accurate and correct, without
exception, as of the Effective Date and as
of the Closing Date.

64.  Oral Agreements
 Ambiguous Contracts
 Breach of Fiduciary
Duty Claims
 Confusing Federal
Securities Statutes
X

65. Dietrichson v. Knott, C.A. No. 11965-VCMR, 2017 WL 1400552 (Del. Ch. Apr. 19, 2017).
NxGenEd,
LLC
Dietrichson Knott

66. Dietrichson v. Knott, C.A. No. 11965-VCMR, 2017 WL 1400552 (Del. Ch. Apr. 19, 2017).
NxGenEd,
LLC
Dietrichson Knott
Operating Agreement
• Members entitled to
distributions, not
salaries.
• Any salary to a director
must be approved by
the board.

67. Dietrichson v. Knott, C.A. No. 11965-VCMR, 2017 WL 1400552 (Del. Ch. Apr. 19, 2017).
NxGenEd,
LLC
Dietrichson Knott
Operating Agreement
• Members entitled to
distributions, not
salaries.
• Any salary to a director
must be approved by
the board.
Board never approved a
salary for any director or
employee.

68. Dietrichson v. Knott, C.A. No. 11965-VCMR, 2017 WL 1400552 (Del. Ch. Apr. 19, 2017).
NxGenEd,
LLC
Dietrichson Knott
Operating Agreement
• Members entitled to
distributions, not
salaries.
• Any salary to a director
must be approved by
the board.
Board never approved a
salary for any director or
employee. Blackboard,
Inc.
APA – sales proceeds to be
distributed in following
order:
(1) creditors;
(2) Members of board other
than Dietrichson &
Knott
(3) 2/3 to Dietrichson; 1/3
to Knott

69. Dietrichson v. Knott, C.A. No. 11965-VCMR, 2017 WL 1400552 (Del. Ch. Apr. 19, 2017).
NxGenEd,
LLC
Dietrichson Knott
Operating Agreement
• Members entitled to
distributions, not
salaries.
• Any salary to a director
must be approved by
the board.
Board never approved a
salary for any director or
employee. Blackboard,
Inc.
APA – sales proceeds to be
distributed in following
order:
(1) creditors;
(2) Members of board other
than Dietrichson &
Knott
(3) 2/3 to Dietrichson; 1/3
to Knott
$$$
$$$

70. Dietrichson v. Knott, C.A. No. 11965-VCMR, 2017 WL 1400552 (Del. Ch. Apr. 19, 2017).
NxGenEd,
LLC
Dietrichson Knott
Operating Agreement
• Members entitled to
distributions, not
salaries.
• Any salary to a director
must be approved by
the board.
Board never approved a
salary for any director or
employee. Blackboard,
Inc.
APA – sales proceeds to be
distributed in following
order:
(1) creditors;
(2) Members of board other
than Dietrichson &
Knott
(3) 2/3 to Dietrichson; 1/3
to Knott
$$$
Breach of
fiduciary
duty;
waste of
corporate
assets

71. Dietrichson v. Knott, C.A. No. 11965-VCMR, 2017 WL 1400552 (Del. Ch. Apr. 19, 2017).
Breach of fiduciary duty; waste
of corporate assets
Derivative Direct
?

72. Dietrichson v. Knott, C.A. No. 11965-VCMR, 2017 WL 1400552 (Del. Ch. Apr. 19, 2017).
Breach of fiduciary duty; waste
of corporate assets
Derivative Direct
?
Two-part test:
(1) Who suffered the alleged
harm (the company or the
suing stockholder,
individually)?
and
(2) Who would receive the
benefit of any recover or other
remedy (the company or the
stockholder, individually)?

73. Dietrichson v. Knott, C.A. No. 11965-VCMR, 2017 WL 1400552 (Del. Ch. Apr. 19, 2017).
Breach of fiduciary duty; waste
of corporate assets
Derivative Direct
?
Two-part test:
(1) Who suffered the alleged
harm (the company or the
suing stockholder,
individually)?
and
(2) Who would receive the
benefit of any recover or other
remedy (the company or the
stockholder, individually)?
Dual-nature claims that can be asserted
directly:
“We decline the invitation to further expand
the universe of claims that can be asserted
‘dually’ to hold here that the extraction of
solely economic value from the minority by a
controlling stockholder constitutes direct
injury.”
El Paso Pipeline GP Co., L.L.C. v.
Brinckerhoff, 152 A.3d 1248, 1263–64 (Del.
2016).

74.  Oral Agreements
 Ambiguous Contracts
 Breach of Fiduciary
Duty Claims
 Confusing Federal
Securities Statutes
X

75. City of Birmingham Ret. & Relief Sys. v. Good, 177 A.3d 47 (Del. 2017).
Gerry Broome, AP

76. Directors
City of Birmingham Ret. & Relief Sys. v. Good, 177 A.3d 47 (Del. 2017).
Duke Energy
Corporation
Shareholders
CLAIM ITSELF
• Duty of care claims exculpated under §
102(b)(7) of Delaware General
Corporation Law.
• Asserted violation of oversight duties
under Caremark, 698 A.2d 959 (Del.
Ch. 1996).
• Must rise to a level of bad faith
(directors had actual or constructive
knowledge that their conduct was
legally improper).

77. Directors
City of Birmingham Ret. & Relief Sys. v. Good, 177 A.3d 47 (Del. 2017).
Duke Energy
Corporation
Shareholders
CLAIM ITSELF
• Duty of care claims exculpated under §
102(b)(7) of Delaware General
Corporation Law.
• Asserted violation of oversight duties
under Caremark, 698 A.2d 959 (Del.
Ch. 1996).
• Must rise to a level of bad faith
(directors had actual or constructive
knowledge that their conduct was
legally improper).
DEMAND FUTILITY
The plaintiffs must plead particularized
facts raising “reasonable doubt of the
board’s independence and
disinterestedness when the demand
would reveal board inaction of a nature
that would expose the board to ‘a
substantial likelihood’ of personal
liability.”
Rales v. Blasband, 634 A.2d 927, 934
(Del. 1993).

78. City of Birmingham Ret. & Relief Sys. v. Good, 177 A.3d 47 (Del. 2017).
Duke Energy
Corporation
Directors
Shareholders
Majority Opinion
“None of this reflected well on Duke
Energy. But, the question before us is not
whether Duke Energy should be punished
for its actions. That has already
happened. What is before us is whether a
majority of Duke Energy directors face a
substantial likelihood that they will be
found personally liable for intentionally
causing Duke Energy to violate the law or
consciously disregarding the law.”

79. Directors
City of Birmingham Ret. & Relief Sys. v. Good, 177 A.3d 47 (Del. 2017).
Duke Energy
Corporation
Shareholders
Majority Opinion
“None of this reflected well on Duke
Energy. But, the question before us is not
whether Duke Energy should be punished
for its actions. That has already
happened. What is before us is whether a
majority of Duke Energy directors face a
substantial likelihood that they will be
found personally liable for intentionally
causing Duke Energy to violate the law or
consciously disregarding the law.”
Dissent (Chief Justice Strine)
“Sadly, my dissent rests on my reluctant
conclusion that the facts as pled support a
fair inference that the board was all too
aware that Duke’s business strategy
involved flouting important laws, while
employing a strategy of political
influence-seeking and cajolement to
reduce the risk that the company would
be called to fair account.”

80.  Oral Agreements
 Ambiguous Contracts
 Breach of Fiduciary
Duty Claims
 Confusing Federal
Securities Statutes
X

81. McKenna v. Singer, C.A. No. 11371-VCMR, 2017 WL 3500241 (Del. Ch. July 31, 2017).
McKennas Singers

82. McKenna v. Singer, C.A. No. 11371-VCMR, 2017 WL 3500241 (Del. Ch. July 31, 2017).
McKennas Singers
Singer Energy Group, LLC

83. McKenna v. Singer, C.A. No. 11371-VCMR, 2017 WL 3500241 (Del. Ch. July 31, 2017).
McKennas Singers
Singer Energy Group, LLC
Robison Energy, LLC

84. McKenna v. Singer, C.A. No. 11371-VCMR, 2017 WL 3500241 (Del. Ch. July 31, 2017).
McKennas Singers
Singer Energy Group, LLC
Robison Energy, LLC
Robison Energy Fund, LLC
Green Energy Companies, LLC

85. McKenna v. Singer, C.A. No. 11371-VCMR, 2017 WL 3500241 (Del. Ch. July 31, 2017).
McKennas Singers
Singer Energy Group, LLC
Robison Energy, LLC
Robison Energy Fund, LLC
Green Energy Companies, LLC
Westport Capital Partners, LLC

86. McKenna v. Singer, C.A. No. 11371-VCMR, 2017 WL 3500241 (Del. Ch. July 31, 2017).
McKennas Singers
Singer Energy Group, LLC
Robison Energy, LLC
Robison Energy Fund, LLC
Green Energy Companies, LLC
Westport Capital Partners, LLC
GEC Energy Holdings, LLC

87. McKenna v. Singer, C.A. No. 11371-VCMR, 2017 WL 3500241 (Del. Ch. July 31, 2017).
McKennas Singers
Singer Energy Group, LLC
Robison Energy, LLC
Robison Energy Fund, LLC
Green Energy Companies, LLC
Westport Capital Partners, LLC
GEC Energy Holdings, LLC
Breach of
fiduciary
duty

88. McKenna v. Singer, C.A. No. 11371-VCMR, 2017 WL 3500241 (Del. Ch. July 31, 2017).
“A corporate officer of director may
not take a business opportunity for
his own if:
(1) the corporation is financially able
to exploit the opportunity;
(2) the opportunity is within the
corporation’s line of business;
(3) the corporation has an interest or
expectancy in the opportunity;
and
(4) by taking the opportunity for his
own, the corporate fiduciary will
thereby be placed in a position
inimicable to his duties to the
corporation.”
Broz v. Cellular Info. Sys., Inc., 673
A.2d 148, 155 (Del. 1996).

89. McKenna v. Singer, C.A. No. 11371-VCMR, 2017 WL 3500241 (Del. Ch. July 31, 2017).
Only if the transaction with the entity
is an “economically rational
alternative”
“A corporate officer of director may
not take a business opportunity for
his own if:
(1) the corporation is financially able
to exploit the opportunity;
(2) the opportunity is within the
corporation’s line of business;
(3) the corporation has an interest or
expectancy in the opportunity;
and
(4) by taking the opportunity for his
own, the corporate fiduciary will
thereby be placed in a position
inimicable to his duties to the
corporation.”
Broz v. Cellular Info. Sys., Inc., 673
A.2d 148, 155 (Del. 1996).

90.  Oral Agreements
 Ambiguous Contracts
 Breach of Fiduciary
Duty Claims
 Confusing Federal
Securities Statutes
X

91. Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
Securities Exchange Act of 1934
§ 10(b) & Rule 10b-5
Securities Act of 1933
§ 11 & § 12(a)(2)

92. Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
Securities Act of 1933
§ 11 & § 12(a)(2)
Concurrent state & federal court
jurisdiction; no removal right
Securities Exchange Act of 1934
§ 10(b) & Rule 10b-5
Exclusive federal court jurisdiction

93. PSLRA (1995) – substantive
& procedural limitations,
particularly on class actions
Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
Securities Act of 1933
§ 11 & § 12(a)(2)
Concurrent state & federal court
jurisdiction; no removal right
Securities Exchange Act of 1934
§ 10(b) & Rule 10b-5
Exclusive federal court jurisdiction

94. Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
Securities Act of 1933
§ 11 & § 12(a)(2)
Concurrent state & federal court
jurisdiction; no removal right
Securities Exchange Act of 1934
§ 10(b) & Rule 10b-5
Exclusive federal court jurisdiction
PSLRA (1995) – substantive
& procedural limitations,
particularly on class actions
SLUSA (1998) – bars
securities class actions based
on state law (if filed in state
court, can be removed &
dismissed)

95. Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
Securities Act of 1933
§ 11 & § 12(a)(2)
Concurrent state & federal court
jurisdiction; no removal right
Securities Exchange Act of 1934
§ 10(b) & Rule 10b-5
Exclusive federal court jurisdiction
PSLRA (1995) – substantive
& procedural limitations,
particularly on class actions
SLUSA (1998) – bars
securities class actions based
on state law (if filed in state
court, can be removed &
dismissed)
Class actions asserting
‘34 Act claims can
only be heard in
federal court.
Securities class actions
asserting state law claims are
barred, whether asserted in
state or federal court.

96. Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
Securities Act of 1933
§ 11 & § 12(a)(2)
Concurrent state & federal court
jurisdiction; no removal right
Securities Exchange Act of 1934
§ 10(b) & Rule 10b-5
Exclusive federal court jurisdiction
PSLRA (1995) – substantive
& procedural limitations,
particularly on class actions
SLUSA (1998) – bars
securities class actions based
on state law (if filed in state
court, can be removed &
dismissed)
Class actions asserting
‘34 Act claims can
only be heard in
federal court.
Securities class actions
asserting state law claims are
barred, whether asserted in
state or federal court.
Can class actions asserting
‘33 Act claims still be heard
in state court, or are they
barred by SLUSA?

97. Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
SLUSA (15 U.S.C. § 77p(b))
“No covered class action based upon
the statutory or common law of any
State . . . may be maintained in any
State or Federal court by any private
party alleging . . . [securities law
violations.”

98. Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
SLUSA (15 U.S.C. § 77p(b))
“No covered class action based upon
the statutory or common law of any
State . . . may be maintained in any
State or Federal court by any private
party alleging . . . [securities law
violations.”
Doesn’t apply to class actions
asserting ‘33 Act claims in state
court!

99. Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
SLUSA (15 U.S.C. § 77p(b))
“No covered class action based upon
the statutory or common law of any
State . . . may be maintained in any
State or Federal court by any private
party alleging . . . [securities law
violations.”
Doesn’t apply to class actions
asserting ‘33 Act claims in state
court!
‘33 Act (15 U.S.C. § 77v(a))
“The district courts of the United
States . . . shall have jurisdiction
concurrent with State and Territorial
courts, except as provided in section
77p of this title with respect to
covered class actions, of all suits in
equity and actions at law brought to
enforce any liability or duty created
by this subchapter.”

100. Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
SLUSA (15 U.S.C. § 77p(b))
“No covered class action based upon
the statutory or common law of any
State . . . may be maintained in any
State or Federal court by any private
party alleging . . . [securities law
violations.”
Doesn’t apply to class actions
asserting ‘33 Act claims in state
court!
‘33 Act (15 U.S.C. § 77v(a))
“The district courts of the United
States . . . shall have jurisdiction
concurrent with State and Territorial
courts, except as provided in section
77p of this title with respect to
covered class actions, of all suits in
equity and actions at law brought to
enforce any liability or duty created
by this subchapter.”
???

101. Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
SLUSA (15 U.S.C. § 77p(b))
“No covered class action based upon
the statutory or common law of any
State . . . may be maintained in any
State or Federal court by any private
party alleging . . . [securities law
violations.”
Doesn’t apply to class actions
asserting ‘33 Act claims in state
court!
‘33 Act (15 U.S.C. § 77v(a))
“The district courts of the United
States . . . shall have jurisdiction
concurrent with State and Territorial
courts, except as provided in section
77p of this title with respect to
covered class actions, of all suits in
equity and actions at law brought to
enforce any liability or duty created
by this subchapter.”
???
“You may have fruit
after dinner, except for
lollipops.”

102. Cyan v. Beaver Cty Employees Ret. Fund, 138 S. Ct. 1061 (2018).
SLUSA (15 U.S.C. § 77p(b))
“No covered class action based upon
the statutory or common law of any
State . . . may be maintained in any
State or Federal court by any private
party alleging . . . [securities law
violations.”
Doesn’t apply to class actions
asserting ‘33 Act claims in state
court!
‘33 Act (15 U.S.C. § 77v(a))
“The district courts of the United
States . . . shall have jurisdiction
concurrent with State and Territorial
courts, except as provided in section
77p of this title with respect to
covered class actions, of all suits in
equity and actions at law brought to
enforce any liability or duty created
by this subchapter.”
???
“By its terms, § 77v(a)’s ‘except clause’ does nothing to
deprive state courts of their jurisdiction to decide class
actions brought under the 1933 Act. . . . State-court
jurisdiction over 1933 Act claims thus continues
undisturbed.”

103.  Oral Agreements
 Ambiguous Contracts
 Breach of Fiduciary
Duty Claims
 Confusing Federal
Securities Statutes
X

104. Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).
Sarbanes-Oxley (2002)
18 U.S.C. § 1514A
Anti-Retaliation Protection for
Whistleblowers

105. Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).
Sarbanes-Oxley (2002)
18 U.S.C. § 1514A
Anti-Retaliation Protection for
Whistleblowers
• Providing info to whom? a federal
regulatory or law enforcement agency,
Congress, or any “person with
supervisory authority over the
employee”

106. Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).
• Must exhaust administrative remedies
• Entitled to backpay with interest
Sarbanes-Oxley (2002)
18 U.S.C. § 1514A
Anti-Retaliation Protection for
Whistleblowers
• Providing info to whom? a federal
regulatory or law enforcement agency,
Congress, or any “person with
supervisory authority over the
employee”

107. Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).
• Must exhaust administrative remedies
• Entitled to backpay with interest
Dodd-Frank (2010)
15 U.S.C. § 78u-6
Anti-Retaliation Protection for
Whistleblowers
Sarbanes-Oxley (2002)
18 U.S.C. § 1514A
Anti-Retaliation Protection for
Whistleblowers
• Providing info to whom? a federal
regulatory or law enforcement agency,
Congress, or any “person with
supervisory authority over the
employee”

108. Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).
• Must exhaust administrative remedies
• Entitled to backpay with interest
Dodd-Frank (2010)
15 U.S.C. § 78u-6
Anti-Retaliation Protection for
Whistleblowers
• No need to exhaust administrative
remedies
• Entitled to double backpay with interest
Sarbanes-Oxley (2002)
18 U.S.C. § 1514A
Anti-Retaliation Protection for
Whistleblowers
• Providing info to whom? a federal
regulatory or law enforcement agency,
Congress, or any “person with
supervisory authority over the
employee”

109. Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).
• Must exhaust administrative remedies
• Entitled to backpay with interest
Dodd-Frank (2010)
15 U.S.C. § 78u-6
Anti-Retaliation Protection for
Whistleblowers
• No need to exhaust administrative
remedies
• Entitled to double backpay with interest
• Providing info to whom?
Sarbanes-Oxley (2002)
18 U.S.C. § 1514A
Anti-Retaliation Protection for
Whistleblowers
• Providing info to whom? a federal
regulatory or law enforcement agency,
Congress, or any “person with
supervisory authority over the
employee”

110. Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).
15 U.S.C. § 78u-6(a)(6)
The term “whistleblower” means
any individual who provides, or 2 or
more individuals acting jointly who
provide, information relating to a
violation of the securities laws to the
Commission, in a manner
established, by rule or regulation, by
the Commission.

111. Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).
15 U.S.C. § 78u-6(a)(6)
The term “whistleblower” means
any individual who provides, or 2 or
more individuals acting jointly who
provide, information relating to a
violation of the securities laws to the
Commission, in a manner
established, by rule or regulation, by
the Commission.
Limited to those who report to the
SEC

112. Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).
15 U.S.C. § 78u-6(a)(6)
The term “whistleblower” means
any individual who provides, or 2 or
more individuals acting jointly who
provide, information relating to a
violation of the securities laws to the
Commission, in a manner
established, by rule or regulation, by
the Commission.
15 U.S.C. § 78u-6(h)(1)(a)
No employer may discharge, demote, suspend,
threaten, harass, directly or indirectly, or in any
other manner discriminate against, a
whistleblower in the terms and conditions of
employment because of any lawful act done by
the whistleblower--
(i) in providing information to the Commission in
accordance with this section;
(ii) in initiating, testifying in, or assisting in any
investigation or judicial or administrative action
of the Commission based upon or related to such
information; or
(iii) in making disclosures that are required or
protected under the Sarbanes-Oxley Act of
2002 (15 U.S.C. 7201 et seq.), this chapter,
including section 78j-1(m) of this title, section
1513(e) of Title 18, and any other law, rule, or
regulation subject to the jurisdiction of the
Commission.
Limited to those who report to the
SEC

113. Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).
15 U.S.C. § 78u-6(a)(6)
The term “whistleblower” means
any individual who provides, or 2 or
more individuals acting jointly who
provide, information relating to a
violation of the securities laws to the
Commission, in a manner
established, by rule or regulation, by
the Commission.
15 U.S.C. § 78u-6(h)(1)(a)
No employer may discharge, demote, suspend,
threaten, harass, directly or indirectly, or in any
other manner discriminate against, a
whistleblower in the terms and conditions of
employment because of any lawful act done by
the whistleblower--
(i) in providing information to the Commission in
accordance with this section;
(ii) in initiating, testifying in, or assisting in any
investigation or judicial or administrative action
of the Commission based upon or related to such
information; or
(iii) in making disclosures that are required or
protected under the Sarbanes-Oxley Act of
2002 (15 U.S.C. 7201 et seq.), this chapter,
including section 78j-1(m) of this title, section
1513(e) of Title 18, and any other law, rule, or
regulation subject to the jurisdiction of the
Commission.
Limited to those who report to the
SEC
“[W]e find the statute’s definition of
‘whistleblower’ clear and conclusive.
Because ‘Congress has directly
spoken to the precise question at
issue,’ we do not accord deference to
the contrary view advanced by the
SEC in Rule 21F-2.”

114. Brief of Respondent, Digital Realty Trust, Inc. v. Somers, 2017 WL
4546547 (U.S. 2017).
It would entirely cut out protections for lawyers and auditors - two key
groups with essential roles in catching and stopping unlawful conduct.
Lawson, 134 S. Ct. at 1170; Berman, 801 F.3d at 151 (“[T]here are
categories of whistleblowers who cannot report wrongdoing to the
Commission until after they have reported the wrongdoing to their employer.
Chief among these are auditors and attorneys.”). If an employee must report
internally before having the option of reporting to the SEC, the employee is
left without any meaningful protection at all - “that required preliminary step
would result in early retaliation before the information could reach the
regulators.” Pet. App. 7a; see also id. at 8a (“Sarbanes-Oxley and the
Exchange Act prohibit potential whistleblowers - auditors and lawyers -
from reporting to the SEC until after they have reported internally. The anti-
retaliation provision would do nothing to protect these employees from
immediate retaliation in response to their initial internal report.”) (citation
omitted).
Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).

115. Thank you!
Wendy Gerwick Couture
Professor of Law
University of Idaho
wgcouture@uidaho.edu
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