Justia Contracts Opinion Summaries

Following an accident, Jeremy Marchek sued his auto insurer, United Services Automobile Association (USAA), claiming that the company breached the terms of the policy it issued to him. Marchek argued that USAA wrongfully failed to compensate him for sales taxes and mandatory fees necessary to purchase a replacement vehicle after USAA declared his vehicle to be beyond repair. USAA paid Marchek the pre-accident value of his vehicle minus a deductible but did not include taxes and fees in the payment.The United States District Court for the Western District of Michigan dismissed Marchek’s complaint, ruling that USAA was not contractually obligated to compensate him for taxes and fees. The district court found that the insurance policy did not require USAA to cover these additional costs when calculating the actual cash value (ACV) of the vehicle.The United States Court of Appeals for the Sixth Circuit reviewed the case and reversed the district court’s decision. The appellate court held that the plain language of the insurance policy plausibly requires USAA to compensate Marchek for the sales taxes and mandatory fees necessary to purchase a replacement vehicle. The court found that the policy’s definition of ACV, which is “the amount that it would cost, at the time of loss, to buy a comparable vehicle,” does not unambiguously exclude taxes and fees. Therefore, the case was remanded for further proceedings to determine whether USAA breached the contract by not including these costs in its payment to Marchek. View "Marchek v. United Services Automobile Association" on Justia Law

The plaintiff entered into a lease agreement with the defendant for a new vehicle, which later exhibited multiple defects. Despite several repair attempts, the issues persisted. The plaintiff then filed a lawsuit against the defendant, alleging violations of California’s Song-Beverly Consumer Warranty Act, seeking various forms of relief including replacement or restitution, damages, and attorney fees.The case proceeded to trial in the Los Angeles County Superior Court, where the jury found the defendant liable and awarded the plaintiff damages. However, the jury did not find the defendant’s violation to be willful, thus no civil penalties were awarded. Subsequently, both parties filed motions regarding costs and attorney fees. The trial court ruled in favor of the defendant, limiting the plaintiff to pre-offer costs and attorney fees, and awarding the defendant post-offer costs based on a prior settlement offer under California Code of Civil Procedure section 998.The California Court of Appeal, Second Appellate District, reviewed the case. The court addressed two main issues: whether a section 998 offer consisting of two simultaneous offers is valid, and whether an offer that promises to pay for statutory categories of damages with disputes resolved by a third party is sufficiently certain. The court concluded that simultaneous offers are generally invalid under section 998 due to the uncertainty they create for the trial court in determining whether the judgment is more favorable than the offer. However, since only one of the defendant’s two offers was invalid, the remaining valid offer was operative. The court affirmed the trial court’s decision, holding that the plaintiff was limited to pre-offer costs and attorney fees, and the defendant was entitled to post-offer costs. View "Gorobets v. Jaguar Land Rover North America, LLC" on Justia Law

Torrey Kath brought a personal injury lawsuit against Michael Prochnow and Prochnow Farms, alleging that Prochnow moved a semi-truck while Kath was underneath, causing significant injury. Kath and Prochnow entered into a Miller-Shugart agreement, where Prochnow accepted damages, and Kath agreed to collect solely from Prochnow’s insurers. The case was dismissed with prejudice after a stipulation of dismissal was filed.Kath then filed a declaratory judgment action against Farmers Union Mutual Insurance Company (FUMIC), which insured Prochnow under a farm liability policy. Kath sought declarations that the policy covered his injuries and that the Miller-Shugart agreement was reasonable and binding on FUMIC. The District Court of Stutsman County granted Kath summary judgment on the coverage issue, interpreting the policy’s motor vehicle exclusion as not applying to the coverage added by a farm employer liability endorsement.FUMIC moved for summary judgment, arguing it had no duty to indemnify Prochnow because the personal injury action had been dismissed with prejudice. While this motion was pending, Kath and Prochnow successfully moved to vacate the dismissal and entered a $2 million judgment against Prochnow, to be paid solely by FUMIC. The district court then denied FUMIC’s motion for summary judgment, holding that the judgment in the personal injury action rendered FUMIC’s motion moot and granted summary judgment in favor of Kath on the second count of his complaint.The North Dakota Supreme Court reviewed the case and reversed the district court’s judgment. The Supreme Court held that the policy’s motor vehicle exclusion applied to Kath’s injuries, and thus, the policy did not provide coverage. The court concluded that the endorsement did not supersede the motor vehicle exclusion and that the policy, when read as a whole, excluded coverage for injuries related to the use of motor vehicles. View "Kath v. Farmers Union Mutual Ins. Co." on Justia Law

Debra Stevenson and Eugene Smith co-own a property for which Stevenson initially took out a loan from Wells Fargo. After defaulting, she refinanced with Fremont Investment & Loan, which paid off the Wells Fargo loan. Stevenson defaulted again and filed for bankruptcy. HSBC Bank, as Fremont's successor, sought to enforce its interest in the property through equitable subrogation, claiming the right to stand in Wells Fargo's position.In bankruptcy court, HSBC was found to be the holder of the note and entitled to equitable subrogation for the amount used to pay off the Wells Fargo loan. The federal district court adopted this decision, and the D.C. Circuit affirmed, holding that HSBC could enforce its interest despite Fremont's knowledge of Smith's co-ownership and refusal to sign the loan documents.The District of Columbia Court of Appeals reviewed the Superior Court's grant of summary judgment to HSBC. The court held that Stevenson and Smith were collaterally estopped from relitigating issues decided in federal court, including HSBC's standing and entitlement to equitable subrogation. The court also rejected their Truth in Lending Act (TILA) rescission argument, as it had been previously litigated and decided against them. The court affirmed the Superior Court's ruling, finding no genuine issues of material fact and that HSBC was entitled to judgment as a matter of law. View "Stevenson v. HSBC Bank USA" on Justia Law

Hawaiian Airlines entered into a contract with Boeing, agreeing to indemnify Boeing for any taxes incurred on maintenance supply parts sold to Hawaiian. Boeing did not remit general excise taxes (GET) on these sales, claiming an exemption under Hawai'i Revised Statutes (HRS) § 237-24.9. The Hawai'i Department of Taxation audited Boeing for tax years 2013-2018 and proposed disallowing the exemption. Boeing received a Notice of Proposed Assessment (NOPA) in May 2021, and Hawaiian paid $1,624,482.75 under protest, then filed a lawsuit seeking a declaration that GET was not owed and a refund of its payment.The Tax Appeal Court dismissed the lawsuit, ruling it lacked jurisdiction because there was no "final agency decision" or "actual dispute" at the time of Hawaiian's payment. The court found that the inter-office memorandum, email, and closing letter from the Department did not constitute formal administrative decisions. The Intermediate Court of Appeals (ICA) affirmed the dismissal, citing the need for a formal administrative decision to create an actual dispute under HRS § 40-35.The Supreme Court of Hawai'i reviewed the case and held that a NOPA qualifies as a "formal administrative decision" sufficient to create an actual dispute for HRS § 40-35 jurisdiction purposes. The court found that the NOPA contained a demand and determination of tax liability, thus meeting the requirements set forth in Grace Business Development Corp. v. Kamikawa. The court vacated the tax court's dismissal and the ICA's judgment, remanding the case for further proceedings consistent with its opinion. View "Tax Appeal of Hawaiian Airlines, Inc. v. Department of Taxation" on Justia Law

Kenneth and Janet Lathrop purchased a motorhome from a dealer in California, manufactured by Thor Motor Coach, Inc. They later sued the dealer and Thor under the Song-Beverly Consumers Warranty Act and the Consumer Legal Remedies Act (CLRA), alleging defects in the motorhome and failure to perform necessary repairs. Thor moved to stay the action based on a forum selection clause in its warranty, which designated Indiana as the exclusive forum for disputes and included a jury trial waiver and an Indiana choice-of-law clause. Thor acknowledged these provisions were unenforceable under California law and offered to stipulate that California substantive rights would apply in an Indiana court.The Superior Court of Los Angeles County granted Thor’s motion to stay, finding the forum selection clause mandatory and not unreasonable. The court placed the burden on the Lathrops to show that enforcing the clause was unreasonable. The Lathrops appealed, arguing that the trial court applied the wrong standard and that Thor did not meet its burden to show that litigating in Indiana would not diminish their unwaivable rights under California law.The California Court of Appeal, Second Appellate District, Division Seven, reviewed the case and concluded that the trial court erred by placing the burden on the Lathrops instead of Thor. The appellate court held that Thor did not meet its burden to show that litigating in Indiana would not substantially diminish the Lathrops’ rights under the Song-Beverly Act and the CLRA. The court also found that enforcing the forum selection clause based on Thor’s proposed stipulation would violate California public policy and that the stipulation was insufficient to protect the Lathrops’ unwaivable statutory rights. Consequently, the appellate court reversed the trial court’s order granting the motion to stay and directed the trial court to deny the motion. View "Lathrop v. Thor Motor Coach, Inc." on Justia Law

The case involves a challenge to New York City's Guaranty Law, which was enacted in response to the COVID-19 pandemic. The law rendered personal guaranties of commercial lease obligations arising between March 7, 2020, and June 30, 2021, permanently unenforceable and identified efforts to collect on such guaranties as proscribed commercial tenant harassment. Plaintiffs, a group of New York City landlords, argued that the law violated the Contracts Clause of the U.S. Constitution.Initially, the United States District Court for the Southern District of New York dismissed the plaintiffs' constitutional challenges, but the United States Court of Appeals for the Second Circuit reversed the dismissal of the Contracts Clause challenge and remanded the case for further consideration. On remand, the district court granted summary judgment in favor of the plaintiffs, finding that the Guaranty Law was unconstitutional.The City of New York appealed, arguing that the plaintiffs lacked standing because the City did not enforce the Guaranty Law. The Second Circuit found that while the plaintiffs had standing at the pleadings stage due to the presumption of enforcement, they failed to meet the heightened burden on summary judgment to show a credible threat of imminent enforcement by the City. The City had unequivocally disavowed any intent to enforce the Guaranty Law against the plaintiffs.The United States Court of Appeals for the Second Circuit vacated the district court's award of summary judgment and remanded the case with instructions to dismiss for lack of subject matter jurisdiction. The court denied the City's request to vacate its earlier judgment reversing the dismissal of the Contracts Clause challenge and denied the City costs on the appeal due to its negligent delay in raising the enforcement-based standing challenge. View "Bochner v. City of New York" on Justia Law

Santanu Das, a sales associate at Tata Consultancy Services, participated in a compensation incentive plan that promised a bonus exceeding $400,000 for achieving certain sales targets. Das met the target but was paid less than $100,000. He sued Tata under Illinois law, which requires employers to pay all agreed-upon compensation. Tata argued that disclaimers in the incentive plan negated any agreement to pay the bonus. The district court dismissed Das’s complaint, leading to this appeal.The United States District Court for the Northern District of Illinois initially dismissed Das’s claims without prejudice. Das amended his complaint, adding breach of contract and fraudulent misrepresentation claims. The district court dismissed the repleaded claims with prejudice but allowed Das to replead the new claims. Das chose to appeal only the Wage Act and fraudulent misrepresentation claims. The district court found that the disclaimers in the incentive plan prevented the formation of an agreement to pay wages and that Das’s fraudulent misrepresentation claim lacked the necessary particularity.The United States Court of Appeals for the Seventh Circuit reviewed the case de novo. The court found that Illinois law does not treat disclaimers as necessarily preventing the formation of mutual assent to terms. The court noted that past practices between Das and Tata could establish mutual assent. The court concluded that Das had plausibly alleged that Tata agreed to pay him the full bonus, reversing the district court’s dismissal of the Wage Act claim. However, the court affirmed the dismissal of the fraudulent misrepresentation claim, as Das failed to allege a scheme to defraud.The Seventh Circuit reversed the district court’s decision on the Wage Act claim and remanded the case for further proceedings. The dismissal of the fraudulent misrepresentation claim was affirmed. View "Das v. Tata Consultancy Services Limited" on Justia Law

A mother and son co-owned a property in Kodiak and hired an excavation company to build a retaining wall. The son made a $15,000 payment to the contractor by credit card. Disputes arose over the contract terms, leading both parties to sue each other for breach of contract. The superior court found that the contractor breached the contract and awarded damages to the mother and son, assuming the $15,000 payment would be reversed by the credit card company.The superior court's final judgment was issued on July 13, 2021. The contractor appealed, and the Alaska Supreme Court reversed several aspects of the superior court’s decision unrelated to the $15,000 payment. More than a year after the final judgment, the mother and son moved for relief from the judgment under Alaska Civil Rule 60(b), arguing that the court mistakenly assumed the $15,000 charge would be reversed. The superior court granted relief under Rule 60(b)(1), finding it had made a mistake about the credit card payment and adjusted its damages award accordingly.The contractor appealed to the Alaska Supreme Court, arguing that the superior court abused its discretion in granting relief under Rule 60(b)(1) because the motion was filed more than a year after the final judgment, making the delay unreasonable. The Alaska Supreme Court agreed, noting that Rule 60(b)(1) motions must be made within one year of the judgment and that this period cannot be tolled or extended. The court found that the superior court erred in tolling the one-year limitation period and that the Bishops' motion was untimely.The Alaska Supreme Court reversed the superior court’s order granting the Rule 60(b)(1) motion for relief from judgment and remanded for disbursement of the supersedeas bond consistent with its decision. View "Red Hook Construction, LLC v. Bishop" on Justia Law

The Boeing Company filed a complaint against the United States, challenging a contracting officer's decision that required Boeing to pay over $1 million due to changes in its cost accounting practices. Boeing argued that the government's demand violated the relevant Federal Acquisition Regulation (FAR) and Cost Accounting Standards (CAS) provisions, which should offset increased costs with decreased costs, resulting in no net increase. Boeing's complaint included three contract claims and an illegal exaction claim.The United States Court of Federal Claims dismissed Boeing's contract claims without prejudice, stating it lacked jurisdiction to review the validity of the regulation under the Administrative Procedure Act (APA). The court also dismissed the illegal exaction claim with prejudice, despite acknowledging jurisdiction, because it believed it lacked the authority to consider the claim under the Contract Disputes Act (CDA).The United States Court of Appeals for the Federal Circuit reversed the lower court's decision. The appellate court held that the Court of Federal Claims has jurisdiction under the CDA to resolve the contract dispute, including the validity of the underlying regulation. The court also held that the Court of Federal Claims has jurisdiction over Boeing's illegal exaction claim under the Tucker Act, 28 U.S.C. § 1491(a)(1), and that the CDA does not preclude this jurisdiction. The case was remanded for further proceedings consistent with these holdings. View "BOEING COMPANY v. US " on Justia Law