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August 2016 Archives

Medical Scope Can Lead to Super Bug Infection

The FDA stated in January 2016 that the company Olympus America was recalling TJF-Q180V duodenoscope due to concerns of contamination leading to antibiotic-resistant bacterial infections. In an effort to reduce the risk of infection, Olympus updated the product with a new design and labeling modifications. The medical scope can lead to super bug infection that severely affects the immune system.

Shareholders Can Now Claim Derivative Suits Against Insolvent Companies in Illinois

On June 24, 2016, in a case of first impression in Illinois, the Illinois Appellate Court, First District, in Caulfield v. The Packer Group, Inc. held that shareholders have standing to pursue a shareholder derivative suit against an insolvent corporation. This development offers a means for a corporation to recoup - for the benefit of its shareholders and creditors - assets lost as a result of management's waste and fiduciary breaches. Shareholders can now claim derivative suits against insolvent companies in Illinois. 

The Packer Group (TPG) was a closely held corporation composed of three wholly owned subsidiaries: Packer Engineering Inc. (PEI), Packer Environmental and Facility Consultants Inc., and Packer Technologies International Inc. The two plaintiffs were PEI's president/chief technical officer and its CEO. They filed a shareholder derivative suit on behalf of TPG and PEI against the inside directors of TPG, alleging that the inside directors misappropriated and wasted TPG's assets for their own benefit. The inside directors were TPG's founder and chairman of the board of directors, its executive vice president of finance and secretary of the board and two members of TPG's board. Shareholders can now claim derivative suits against insolvent companies to right previous loopholes.

Lawyer Breaches Operating Agreement in 1.5 Million Dollar Case

Lawyer Breaches Operating Agreement.Studying the language in an arbitration clause, the California state court of appeals recently reversed an order demanding arbitration of a dispute between a lawyer and his client-turned-business-partner. The lawyer must now defend against a $1.5 million claim based on malpractice and breach of the operating agreement that the lawyer had drafted in connection with his real estate venture with the former client. With arbitration provisions becoming a common feature of lawyer-client retainer agreements, this ruling is worth attention.

The client's 2013 malpractice complaint alleged that while serving as counsel to the client and the companies he was affiliated with, the lawyer and the client decided that they would form a company together to develop properties in the affordable housing market. The lawyer prepared the operating agreement for the LLC, which provided that "any controversy between the parties arising out of this Agreement shall be submitted" to arbitration in Los Angeles. Lawyer Breaches Operating Agreement in this 1.5 Million dollar case.

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