Author: Hamilton

Eagle Cove Camp & Conference Center, Inc. v. County of Oneida (Zoning)

Posted on by Hamilton

In Eagle Cove Camp & Conference Center, Inc. v. County of Oneida (2018AP940), the Court of Appeals District III held that claim preclusion barred most of the plaintiff’s claims against the County and the Town of Woodboro, and the court awarded the Town damages because the action was frivolous.

Eagle Cove sought a conditional use permit to build a Bible camp in Woodboro on property currently zoned as residential. The County accepted the Town’s recommendation to deny Eagle Cove’s conditional use permit application. (The Town itself did not have jurisdiction over the zoning of the property.)

Eagle Cove subsequently filed an action in federal court against the County and Town, claiming violation of the Religious Land Use & Institutionalized Persons Act, Americans with Disabilities Act, Rehabilitation Act, as well as Equal Protection Clause and First Amendment violations. Eagle Cove also alleged violations of the right to freedom to worship under the Wisconsin state constitution and sought certiorari review by the federal court of the County’s decision.

The federal court dismissed Eagle Cove’s federal claims because Eagle Cove failed to meet the burden of proof for any of the claims. The federal court also dismissed Eagle Cover’s state constitutional claims with prejudice. However, the federal court dismissed the certiorari claim without prejudice.

Eagle Cove later filed the instant lawsuit in state court, seeking not only the certiorari claim that the federal court had allowed to proceed, but also fifteen additional state constitutional claims. The County and Town argued that claim preclusion barred the fifteen new claims.

The state appeals court agreed that claim preclusion barred the fifteen additional claims. The claims met the three required elements of claim preclusion:

  1. Identity of parties. It was undisputed that Eagle Cove and the County and Town were the same parties in both the federal and state lawsuit.
  2. Final judgment. The court rejected Eagle Cove’s argument that claim preclusion did not apply because the federal district court did not dispose of the entire case. The court also rejected the argument that the federal and state actions are one “case,” making claim preclusion inapplicable.
  3. Identity of causes of action. Eagle Cove’s federal and state causes of action arise from the same set of facts. Furthermore, both the federal and state actions bring claims of violations of the Wisconsin Constitution Art. I § 18, religious liberty claims, and equal protection claims.

The state appeals court further agreed with federal courts that new case law did not permit Eagle Cove to reopen the federal judgment.

Finally, the court found that Eagle Cove’s inclusion of the Town in this action was frivolous because all the claims against the town were precluded. The Town was not part of the certiorari claim because the County, not the Town, had jurisdiction of Eagle Cove’s conditional use permit application. Therefore, Eagle Cove’s inclusion of the Town in this lawsuit was frivolous, and the court awarded damages to the Town accordingly.

After this court of appeals decision, the only claim left for Eagle Cove to litigate is its certiorari claim against the County.

Warrington v. City of Prairie du Chien (Recreational Immunity)

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In Warrington v. City of Prairie du Chien (2019AP95), the Court of Appeals District IV held that recreational immunity applied, barring parents’ claim that the city was negligent in their son’s drowning during a swim lesson.

The Warringtons’ son died after drowning at the City of Prairie du Chien pool during a swim lesson run by city and school district staff. The Warringtons filed this lawsuit against the city and school district alleging negligence.

The court of appeals dismissed the Warringtons’ claims under Wisconsin’s recreational immunity statute (Wis. Stat. § 895.52(2)(b)), which provides immunity for owners from liability for death or injury of persons engaging in recreational activity on the owner’s property. The statute includes instruction in a recreational activity in the definition of “recreational activity.”

The court rejected the Warringtons’ argument that their son was not engaging in a “recreational activity.” The Warringtons argued their son was not swimming when he was injured because he had been designated as a “non-swimmer” for the purposes of the swimming lesson. Further, they argued their son was not receiving swimming instruction because the pool staff had lost track of him when he drowned. The court said such a narrow construction of the recreational immunity statute as proposed by the Warringtons would counter the legislature’s directive to liberally construe the recreational immunity law in favor of property owners. Therefore, the court upheld recreational immunity in favor of the city. 

Village of Mishicot v. Arseneau (Fourteenth Amendment – Selective Prosecution)

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In Village of Mishicot v. Arseneau (2019AP541), the Court of Appeals District II found that the village did not violate its resident’s Fourteenth Amendment rights by selectively prosecuting her for violation of a floodplain ordinance.

Defendant Jodi Arseneau wanted to repair and expand a storage shed on her property, but the state Department of Natural Resources (DNR) and a village ordinance prohibited such structures in the floodway where Arseneau’s property was located. Arseneau started construction on the shed anyway.

The village sent Arseneau a letter notifying her of her violation of the village’s floodplain ordinance and ordering her to stop construction. Soon after, DNR sent a letter to the village ordering the village to enforce the floodplain ordinance. If the village did not submit a sufficient enforcement plan, the letter stated, DNR would inform the Federal Emergency Management Agency, which could affect the village’s status in the National Flood Insurance Program (NFIP).

Subsequently, Arseneau was cited for violation of the ordinance. The circuit court found that the village violated Arseneau’s Fourteenth Amendment’s  Equal Protection Clause by selectively prosecuting her case. The circuit court agreed with Arseneau that the village did not cite other residents with similar storage units in the floodplain. The village appealed.

To succeed in a selective prosecution claim, the defendant must show the prosecution had a discriminatory effect and a discriminatory purpose. The appeals court found the prosecution against Arseneau did not have a discriminatory effect because she and the other residents who were not prosecuted were not similarly situated. Other residents had worked with the village after receiving initial warnings, and Arseneau’s case was unique in that the village received notice from DNR that nonenforcement could affect the village’s NFIP status. The court also found that Arseneau failed to prove her prosecution had a discriminatory purpose. Therefore, the village’s citation was upheld.  

Wisconsin Civil Justice Council Issues 2019 Guide to the Wisconsin Supreme Court and Judicial Evaluation

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WCJC has released its 2019 Guide to the Wisconsin Supreme Court and Judicial Evaluation, which reviews the most important cases decided by the Supreme Court of Wisconsin affecting the business community. The 2019 Judicial Evaluation covers the 2018-19 Supreme Court term.

The Judicial Evaluation scores the justices based on the percentage of the reviewed cases in which their position aligned with WCJC’s position. Based on the comprehensive review of decisions affecting the business community, Chief Justice Patience Roggensack and Justice Annette Ziegler scored the highest at 80 percent. Justice Rebecca Bradley scored 79 percent, and Justice Daniel Kelly came in at 76 percent. New to the court this term, Justice Rebecca Dallet scored 59 percent. Justice Walsh Bradley scored 30 percent. In her last term before retiring from the court this year, Justice Shirley Abrahamson scored 28 percent.

“The judicial evaluation provides analyses of the most important decisions affecting Wisconsin’s business community in the 2018-19 term,” said Bill G. Smith, WCJC President and State Director of the National Federation of Independent Business. “Businesses all over the state should read this important document and recognize how the judicial branch affects them and their employees,” added Smith.

The 2019 Judicial Evaluation provides a discussion of the facts and the court’s holding in each of the decisions, including the dissenting opinion(s). The guide then lists how each justice decided the case, along with WCJC’s position on the court’s decision.

“The decisions handed down by the court have a direct effect not just on the parties involved in each case, but on the entire business community, as the court establishes important precedent that is used in future cases,” added Scott Manley, WCJC Vice President and Executive Vice President of Government Relations for Wisconsin Manufacturers & Commerce. “The evaluation is an important tool to inform the public about how these cases are decided by the Supreme Court.”

This is the fourth judicial evaluation issued by WCJC since 2011.

Chief Justice Highlights Business Court in 2019 State of the Judiciary

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On Nov. 6, Wisconsin Supreme Court Chief Justice Patience Roggensack delivered the 2019 State of the Judiciary address. The Chief Justice’s remarks highlighted several initiatives in the 2019-21 state budget and the success of Wisconsin’s Commercial Docket (a.k.a. Business Court) Pilot project that began in July 2017.

The Chief Justice gave examples of the success of the Commercial Docket Pilot Project in Waukesha and the 8th Judicial Administrative District, noting that cases typically taking 36 months have been reduced to 12 months in the commercial docket. In one case, a Green Bay hotel in receivership avoided collapse by using the efficient decision making of the Business Court.

However, Chief Justice Roggensack said the commercial docket is currently underutilized. The court hopes to raise awareness among lawyers that they may choose a commercial docket as the venue for business-related cases. The Commercial Docket was also highlighted in last year’s State of the Judiciary.

Regarding the state budget, the Chief Justice noted the court’s success in working with the governor and legislature on budget initiatives to improve the courts, including public defender pay, increased ADA positions, funding for circuit courts, and judicial salaries.

 

 

Public Hearing Scheduled for Proposed Wisconsin PFAS Regulations

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On Oct. 23, the Wisconsin Department of Natural Resources (DNR) Board voted to approve a preliminary public hearing and comment period on three scope statements proposing to regulate PFAS chemicals. The hearing on all three scope statements will occur on Nov. 12, 2019 at 1:00 p.m. Written comments are due Nov. 19.

PFAS (per- and polyfluoroalkyl substances) are man-made chemicals that are found in many everyday products, including nonstick pans, cleaning products, paints, and firefighting foam. PFAS are present in the bloodstream of 98 percent of Americans. Competing studies debate whether or not PFAS have negative health effects and, if they do, at what level they are harmful.

WCJC is part of the Water Quality Coalition, a coalition of industries, job creators, and taxpayers in the state, as well as scientists and legal scholars, which supports balanced, science-based environmental standards to regulate PFAS. Unnecessarily strict standards would be costly to Wisconsin industry and would open up the state for frivolous lawsuits and potentially millions of dollars in liability.

Gov. Tony Evers had approved the scope statements on PFAS in August. The scope statements would:

  1. Adopt groundwater standards. (SS 090-19). Under this scope statement, DNR would promulgate the Department of Health Services’s (DHS) recommended standards of 20 ppt combined for PFOA and PFOS and a 2 ppt preventive action limit. This rule would apply to all regulated facilities that may impact groundwater.
  2. Adopt surface water quality standards for PFAS. (SS 091-19). Under the scope statement, DNR could also change Wisconsin Pollution Discharge Elimination System (WPDES) permit implementation procedures related to PFAS chemicals, including additional monitoring and new effluent limitations. Currently, DNR can address PFAS discharges in WPDES permits on a case-by-case basis. The proposed rule would set a uniform standard and procedures.
  3. Adopt maximum contaminant levels (MCLs) for drinking water. (SS 089-19). MCLs for drinking water would mostly affect municipal water systems.

Co-chair of the Legislature’s Joint Committee for Review of Administrative Rules (JCRAR) Sen. Stephen Nass (R-Whitewater) requested DNR hold the preliminary public hearing and comment period on each of the scope statements, pursuant to JCRAR’s authority under Wisconsin’s rulemaking statutes (Wis. Stat. Ch. 227). The JCRAR co-chairs’ authority to request preliminary public input was established in the Regulations from the Executive in Need of Scrutiny (REINS) Act passed in 2017.

With the DNR Board’s approval, the agency is now authorized to hold the preliminary public hearing and comment period on the scope statements. After the comment period, the DNR Board can approve the scope statements. DNR plans to ask the board for approval in January 2020. Once the board approves the scope statements, DNR can begin work on drafting the rules and economic impact analyses.

The rules will not be enforceable until DNR drafts final rules, and the governor and legislature approve them.

 

Multi-State Actions by AG Kaul

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Since taking office at the beginning of 2019, Wisconsin Attorney General Josh Kaul has announced the state’s participation in several multistate actions covering various issues. The actions include comments challenging federal administration proposals, investigations into corporations, and multistate lawsuits and amicus briefs. Below is an update on notable multistate actions in which Wisconsin is participating:

 

Multistate Investigations

  • On Oct. 22, Kaul announced Wisconsin’s participation in a bipartisan group of attorneys general investigating Facebook for antitrust issues. There is a total of 47 attorneys general from across the U.S. and territories involved in the investigation.
  • On Sept. 9, Kaul joined 49 attorneys general in a bipartisan investigation of Google for antitrust issues.
  • On July 22, Kaul announced Wisconsin, among 49 other states and territories, reached a settlement with Equifax as a result of the attorneys general investigation into a 2017 data breach.

 

Multistate Lawsuits & Amicus Briefs

  • On Oct. 23, Kaul filed an amicus brief with 15 attorneys general in a Montana case regarding states’ roles in addressing pollution under the Comprehensive Environmental Response, Compensation, and Liability Act.
  • On Oct. 22, Kaul and 19 other attorneys general filed a complaint challenging three rules that make changes to the Endangered Species Act by adding economic considerations and narrowing the circumstances under which animals may be designated endangered, among other reforms.
  • On Sept. 20, Kaul joined a lawsuit challenging a National Highway Traffic Safety Administration rule preempting state-level vehicle emissions standards.
  • On Aug. 13, Kaul joined a coalition of 22 states and seven local governments in a lawsuit challenging the federal Environmental Protection Agency’s Affordable Clean Energy Rule, which repeals the Clean Power Plan. 
  • On June 12, Kaul joined an amicus brief challenging the federal administration’s use of Department of Defense funds to construct a border wall in New Mexico and Arizona. Kaul joined a coalition of 20 states in filing a similar motion in April.
  • On June 11, Kaul joined several other states in a lawsuit seeking to block the merger between T-Mobile and Sprint.
  • On May 21, Kaul joined a coalition filing a legal challenge to a federal rule that would allow health care providers to deny treatment based on the providers’ religious beliefs.
  • On May 16, Kaul filed a lawsuit against Purdue Pharma, alleging the opioid manufacturer contributed to the opioid epidemic. Four other states filed separate lawsuits against the company. Earlier this fall, Kaul declined to join a multidistrict settlement against Purdue Pharma, and the lawsuit is ongoing.
  • On May 13, Kaul joined a coalition of states in filing a lawsuit against generic drug manufacturers, alleging antitrust issues.
  • On March 5, Kaul joined a coalition of 21 states filing a challenge to a rule that would bar clinics receiving Title X grant funding from referring patients for abortion.
  • On Jan. 15, Kaul joined an amicus brief seeking to uphold the Indian Child Welfare Act.

 

Withdrawal from Previous Administration Lawsuits

  • On April 15, Kaul successfully withdrew Wisconsin from a lawsuit challenging Environmental Protection Agency regulations of air pollutants.
  • On April 2, Kaul successfully withdrew from a lawsuit challenging a Department of Health & Human Services rule that includes gender identity and termination of pregnancy in the prohibition of discrimination in health care.
  • On April 5, Kaul withdrew Wisconsin from a multistate lawsuit seeking to declare the Affordable Care Act

 

Comments to Congress & Agencies

  • On Oct. 23, Kaul joined 23 states in a letter to the Environmental Protection Agency. The comments challenged a proposed rule changing states’ authority under the Clean Water Act.
  • On Oct. 17, Kaul joined 28 states in requesting the federal Department of Education discharge federal student loans for students who attended now-closed schools operated by Dream Center Education Holdings, LLC.
  • On Sept. 24, Kaul joined a 24-state coalition opposing federal Department of Agriculture rules revising categorical eligibility for Supplemental Nutrition Assistance Program benefits.
  • On Sept. 20, Kaul joined 27 other states in submitting a letter to the Consumer Financial Protection Bureau stating concerns about a proposed rule regarding debt collection.
  • On Aug. 7, Kaul and 42 other state attorneys general urged the video streaming industry to implement policies to limit tobacco imagery in video content.
  • On Aug. 5, Kaul joined a coalition of 39 attorneys general in a letter to Congress urging legislation to remove federal regulatory barriers to opioid use disorder treatment.
  • On July 30, Kaul joined 21 other state attorneys general in urging Congress to regulate PFAS compounds. 
  • On July 3, Kaul and 15 other attorneys general sent a letter to the federal Department of Housing & Urban Development opposing a rule repealing requirements that shelters house individuals according to gender identity.
  • June 25, Kaul joined 18 other state attorneys general in submitting comments to the federal Department of Labor opposing a proposal to change the department’s interpretation of joint employment.
  • On June 12, Kaul announced that a coalition of 43 attorneys general urged the Federal Trade Commission to develop new antitrust policies, specifically related to digital platforms like Facebook, Google, and Amazon.
  • On May 24, Kaul announced he and 50 other attorneys general from U.S. states and territories submitted a letter asking the federal Department of Education to forgive student loan debt for veterans permanently disabled in connection with their service.
  • On May 8, Kaul joined a bipartisan coalition in urging Congress to pass legislation to provide marijuana-related businesses access to the federal banking system.
  • On May 1, Kaul and 40 other attorneys general urged Congress to fund the Legal Services Corporation, which provides funding for programs like Legal Action of Wisconsin and Wisconsin Judicare.
  • On April 1, Kaul and a bipartisan coalition sent a letter to the Department of Health & Human Services expressing concern about the department’s Pain Management Best Practices Interagency Task Force draft report.
  • On Feb. 18, Kaul joined multistate letters to the Federal Trade Commission on identity theft rules and to the Consumer Financial Protection Bureau on financial consumer products protections.

 

Supreme Court Oral Arguments – November 2019

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The Wisconsin Supreme Court held oral arguments on Monday, Nov. 4 and will also hold oral arguments on Monday, Nov. 25. Cases of note include:

 

Mueller v. TL90108, LLC (Wrongful Taking and Detention) – Nov. 4

In this case, the Supreme Court will determine what constitutes the “cause of action” in a wrongful taking and wrongful detention case and thus triggers the six-year statute of repose under Wis. Stat. §§ 893.35 and 893.51.

In 2017, the owners of a valuable classic car that was stolen in 2001 filed this complaint to recover the car against TL90108, which had bought the stolen car. TL argued that the plaintiffs’ claims were barred by the six-year statute of repose, which TL said began in 2001, when the car was first stolen.

The Court of Appeals found that the plaintiffs’ claims were not barred because the cause of action took place not when the wrongful taking occurred but when the wrongful detention occurred, i.e. when the plaintiffs demanded return of the car and TL refused.

The Supreme Court will decide whether the statute of repose in §§ 893.35 and 893.51 can begin again when the current possessor wrongfully detains property that had been wrongfully taken beyond the statute of repose.

 

Lang v. Lions Club of Cudahy Wisconsin, Inc. (Recreational Immunity) – Nov. 4

In this case, the Supreme Court will decide whether a sound engineer setting up cords at a musical performance was the “agent” of the event organizer, making the sound engineer immune from liability under Wisconsin’s recreational immunity statute (Wis. Stat. § 895.52).  

At an event run by the Lions Club, plaintiff Antoinette Lang tripped over an electrical cord placed by sound engineer Fryed Audio, LLC. Fryed’s principal and a member of the band using the cords, Steve Fryed, positioned the cord prior to the event. While a separate case ruled the Lions Club was entitled to recreational immunity, the appeals court said Fryed was not an “agent” or “occupier” immune under the statute (Wis. Stat. § 895.52). Read more about the case.

 

DSG Evergreen Family Limited Partnership v. Town of Perry (Eminent Domain) – Nov. 4

The Supreme Court will determine whether plaintiffs have a private right of action and whether claim preclusion applies in eminent domain cases where the town promised but did not uphold certain construction standards after compensation proceedings.

The land taken by the Town of Perry in this case included a road, and the condemnation petition required the town to replace the road at a different location. DSG argued that the new road did not meet the “same construction standards” as the former road, violating the petition.

The appeals court held that DSG had no private right of action requiring the town to comply with certain construction standards under Wis. Stat. § 82.50(1) in completing the new road. Furthermore, DSG had no private right of action under the town’s ordinances.

The appeals court further held that claim preclusion applied because DSG failed to bring up its road construction standards argument in previous proceedings regarding just compensation for the eminent domain condemnation of its property. Read more about the case.

 

Emer’s Camper Corral, LLC v. Alderman (Negligent Procurement) – Nov. 25

The Supreme Court will review this issue of first impression: whether plaintiffs claiming negligent procurement by an insurance agent must establish that they could have obtained a non-injurious policy but for their agent’s alleged negligence.

In this case, the appeals court held that Camper Corral failed to produce evidence that it could have otherwise obtained a desired policy, so its agent Alderman did not cause Camper Corral’s damages. With no Wisconsin precedent to rely on, the appeals court looked to a Minnesota decision that requires plaintiffs to show they would have been able to obtain the desired policy terms absent the agent’s negligence. Camper Corral did not produce evidence to prove it could have obtained the desired hail damage policy, so its negligence claim failed. Read more about the case.

 

Supreme Court Accepts New Cases

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The Wisconsin Supreme Court recently accepted several new cases, including Wisconsin Institute for Law & Liberty’s challenge to the governor’s partial veto power on appropriations bills.

 

Correa v. Woodman’s Food Market – Personal Injury

This case will address the standards of proof for establishing constructive notice of a hazard and the determinations a jury may make from video surveillance in premises liability cases. The court of appeals found that plaintiff Correa could not prove the spill by which he was injured existed for a long enough time period to establish the store was negligent. Video footage before the accident did not show a spill happening and could not identify any substance on the floor of the store. Because Correa lacked sufficient evidence, the appeals court ruled in favor of the store. Read more about the case.

 

Bartlett v. Evers – Governor’s Veto

This case filed by Wisconsin Institute for Law & Liberty will review the constitutionality of Gov. Tony Evers’s partial vetoes in the 2019-21 Wisconsin state budget. The court will review whether the governor can strike “essential, integral, and interdependent parts” of a state budget passed by the Legislature.  

The vetoes challenged in the lawsuit:

  • Removed the use of Volkswagen settlement funds for a $3 million school bus replacement grant program. As a result of this partial veto, Gov. Evers directed the Department of Administration to allocate up to $10 million of the settlement funds to a grant program for electric vehicle charging stations.
  • Gave the Department of Transportation $75 million in flexible funding for local transportation projects.
  • Deleted provisions setting light-truck registration fees for all trucks under 10,000 lbs at $100 and instead re-instated a scale of fees based on weight.
  • Changed the definition of “vapor product” for the purpose of the new excise tax on vapor fluids. The veto message stated this would clarify to what products the new tax applies.

 

Town of Delafield v. Central Transport Kriewaldt – Federal Preemption of Weight Limits

This case will review whether federal transportation law preempts a town’s seasonal weight restriction on certain roads.

Delafield posted signs identifying a seasonal weight restriction prohibiting vehicles over six tons from driving on designated town roads. A Central Transport delivery truck over six tons was subsequently issued a citation for driving on one of the designated roads while making a delivery to a Delafield resident.

Federal law (U.S. Code Title 49 s. 31114(a) and Title 23 s. 658.19) requires towns provide “reasonable access” between the interstate and terminals. Central Transport argued that the federal transportation law preempts the town’s weight limit because it did not allow Central Transport reasonable access between the interstate and the place of delivery in the town. Read more about the case.

Link v. Link (Fair Value & Corporate Misappropriation)

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In Link v. Link (2018AP1715), the Court of Appeals District III addressed fair value and corporate misappropriation claims among the owners of Link Snacks and various related entities, which sell and distribute meat products.

Jack, Troy, and Jay Link together owned various related entities including Link Snacks, Link Global, and its subsidiary Link Canada. When Jay and Troy acquired their shares of Link Snacks, they entered into a Buy-Sell Agreement, which gave Link Snacks the option to redeem their shares at fair market value if their employment was terminated. After a dispute and initial litigation in 2005, a court ordered the execution of the Buy-Sell Agreement, forcing Jay to return his Link Snack shares at fair market value. As a result of the 2005 litigation, the parties also dissolved the jointly-owned company Link Global.

Jay later filed the instant fair value claim and corporate misappropriation claims against Jack, Troy, and Link Snacks chief financial officer John Hermeier.

 

Fair Value

Jay alleged that the defendants had breached their fiduciary duty and that he should receive “fair value” for his Link Snacks shares as damages, instead of “fair market value” as stated in the Buy-Sell Agreement. (“Fair value” is the corporation’s net worth over the total number of shares. “Fair market value” reduces fair value by adjusting for lack of control and lack of marketability.)

The defendants argued Jay’s fair value claim was barred by claim preclusion. The court acknowledged that Jay’s claim meets the three requirements of claim preclusion. (The court found an identity of parties, final judgment, and identity of causes of action between the 2005 litigation and the instant case.) However, an exception to claim preclusion applied because Jay’s fair value claim had not been ripe for adjudication in the 2005 litigation. The fair value claim was contingent on the outcome of the sale of Jay’s Link Snacks shares, which had not yet occurred at the time of the 2005 litigation.

Furthermore, the two-year statute of limitations on the intentional tort of breach of fiduciary duty (Wis. Stat. § 893.57) did not bar Jay’s fair value claim because the fair value claim accrued when Jay sold his Link Snacks shares in 2009. The court rejected the defendants’ argument that the claim accrued in 2005 when Jay was allegedly forced out of Link Snacks.

 

Corporate Misappropriation

Jay’s corporate misappropriation claims alleged that the defendants had intentionally devalued Link Global’s subsidiary Link Canada in order to decrease the value of Jay’s share in Link Global. The court dismissed these claims, finding that Jay did not have standing to pursue the claims on his own behalf or on behalf of Link Global.

Since the injuries from the defendants’ alleged improper devaluation of Link Canada were primary to Link Canada, Jay would have had to file a derivative action on behalf of Link Canada. Shareholders may file derivative actions on behalf a corporation when the claim belongs to the corporation. In this case, Jay did not have standing as an individual because the claim belonged to Link Canada.  

The court further found that Jay could not bring corporate misappropriation claims as a derivative action on behalf of Link Global. Again, the court found the primary injury of the devaluation of Link Canada was to Link Canada itself. Link Global did not have standing to sue for injuries on behalf of its subsidiary Link Canada, so the court dismissed Jay’s derivative claim in addition to his individual claim.