Justia Contracts Opinion Summaries

A dispute arose over a property contract concerning two adjacent restaurant parcels in Humble, Texas, formerly owned by affiliates of Landry’s, Inc. After Landry’s sold one parcel, a Reciprocal Easement Agreement was created to regulate construction and modifications on each parcel. Years later, 20100 Eastex, L.L.C. purchased the parcel previously occupied by Joe’s Crab Shack and leased it to BJ’s Brewery, which planned to demolish the existing building and construct a new one. BJ’s requested Saltgrass’s consent for the project, but Saltgrass denied approval, leading Eastex to claim that consent was deemed granted under the contract due to alleged procedural defects.The United States District Court for the Southern District of Texas granted summary judgment to Saltgrass, finding that the Agreement required Eastex to obtain Saltgrass’s express written consent before demolition or new construction, and Eastex failed to properly request approval. Eastex appealed, and the United States Court of Appeals for the Fifth Circuit initially found Section 3.3 of the Agreement ambiguous and remanded for further factfinding. On remand, the district court considered extrinsic evidence, particularly the uncontested testimony of the drafter, and again granted summary judgment for Saltgrass.On appeal, the United States Court of Appeals for the Fifth Circuit concluded that undisputed extrinsic evidence clarified Section 3.3, establishing that Saltgrass’s consent was required for any demolition or new construction. The court affirmed summary judgment for Saltgrass, dismissed Eastex’s appeal regarding attorney fees for lack of jurisdiction, and remanded for determination of Saltgrass’s appellate attorney fees. The main holdings were: Saltgrass’s interpretation of the contract was correct; summary judgment was proper due to lack of genuine factual dispute; and Saltgrass is entitled to appellate attorney fees. View "20100 Eastex v. Saltgrass" on Justia Law

Compeer, a group of federally chartered farm credit associations, entered into a master participation agreement with Corporate America Lending, Inc. (CAL), under which Compeer paid CAL $58 million in exchange for the right to receive all payments due on a set of agricultural loans CAL had originated to Famoso Hills Ranch in California. Under the agreement, CAL was to promptly remit any payments or proceeds received on these loans to Compeer. When Famoso refinanced its loans and paid off the balance to CAL, CAL failed to notify Compeer or transfer the payoff proceeds as required and instead concealed receipt of the funds and withheld them as a negotiation tactic, eventually claiming a right to offset based on alleged damages suffered.Arbitration proceedings commenced, resulting in an award in favor of Compeer, finding it was unconditionally entitled to the payoff proceeds and that CAL had no legal basis to withhold them. The arbitration panel found for Compeer on its claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. Compeer moved in the United States District Court for the District of Minnesota to confirm the award and appoint a receiver to secure the funds. The district court confirmed the arbitration award, finding it final and enforceable, and appointed a receiver due to CAL’s repeated noncompliance and attempts to dissipate the funds. CAL appealed, arguing the award was nonfinal, violated public policy, and the receivership was improper due to a forum-selection clause and lack of necessity.The United States Court of Appeals for the Eighth Circuit affirmed the district court’s rulings. The court held that the arbitration award was final and confirmable, the public policy exception to vacatur under the Federal Arbitration Act did not require setting aside the award given the alternative equitable bases for Compeer’s recovery, and the district court acted within its discretion in appointing a receiver due to CAL’s conduct and the inadequacy of alternative remedies. View "Compeer Financial, ACA v. Corp. Amer. Lending, Inc." on Justia Law

Alta Power, L.L.C. sought to build peaker plants in Texas using refurbished turbines, ultimately contracting with WattStock, which collaborated with General Electric International, Inc. (GE) as a subcontractor. Alta and WattStock’s Master Agreement included a mutual waiver of consequential damages for claims “arising out of or connected in any way to” the agreement, covering both parties and their subcontractors. The turbine arrangement failed in 2020, leading to litigation among Alta, WattStock, and later GE. WattStock filed for bankruptcy and removed the case to the United States District Court for the Northern District of Texas. Alta sought consequential damages from GE, alleging tortious conduct, fraudulent inducement, and arguing the waiver did not apply to intentional torts.The district court for the Northern District of Texas granted summary judgment to GE, holding that GE, as WattStock’s subcontractor, was an intended third-party beneficiary of the consequential-damages waiver. The court found the waiver enforceable under Texas law, even in the face of alleged fraudulent inducement, referencing Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC, 572 S.W.3d 213 (Tex. 2019), and concluded that the waiver applied to all causes of action, including intentional torts. The district court dismissed all claims by Alta with prejudice, except for GE’s breach of contract claim, which was also dismissed.The United States Court of Appeals for the Fifth Circuit reviewed the summary judgment de novo and affirmed the district court’s decision. The Fifth Circuit held that GE was an intended third-party beneficiary eligible to enforce the waiver, that alleged fraudulent inducement did not render the waiver unenforceable under Texas law, and that the waiver applied to intentional tort claims. The court affirmed the dismissal of Alta’s claims against GE. View "Alta v. General Electric" on Justia Law

A carpenter who managed his own construction business was involved in a multi-vehicle accident in September 2013, while driving a car owned by another individual. The accident, caused by another driver, resulted in significant injuries and financial losses for the plaintiff, who claimed over $75,000 in medical expenses and more than $250,000 in lost income. The plaintiff had a business insurance policy with Main Street America Assurance Company (MSAA) during the relevant period. The driver and owner of the vehicle that struck the plaintiff were insured by GEICO General Insurance Company.Previously, the plaintiff sued the at-fault driver and owner (the Mathieus) in Kent County Superior Court and later settled that case. In the present suit, the plaintiff brought claims against both GEICO and MSAA for breach of contract, breach of the implied covenant of good faith and fair dealing, and statutory bad faith refusal to settle. Both defendants moved to sever the bad faith and implied covenant claims and to stay discovery on those claims, which the Superior Court granted. The court also denied the plaintiff’s motion to compel additional document production from GEICO, pending resolution of summary judgment motions. Ultimately, the Superior Court granted summary judgment for both defendants.On appeal, the Supreme Court of Rhode Island affirmed the Superior Court’s judgments. The Court held that MSAA’s business insurance policy expressly excluded coverage for injuries arising from automobile use, so the plaintiff’s contract and related claims failed as a matter of law. As to GEICO, the Court found that Rhode Island law prohibits direct actions against an insurer under these circumstances, and the plaintiff had no contractual or third-party rights under the GEICO policy. The Court also concluded that the issues related to severance and discovery were moot given the disposition of the contract claims. View "Menge v. GEICO General Insurance Company" on Justia Law

A founder of a Delaware start-up, after personally paying a consultant for services due to lack of company funds, negotiated with the consultant to resolve claims for unpaid fees. The consultant agreed to accept a reduced cash payment and a warrant entitling her to purchase one percent of the company's common stock, with the percentage measured at the time of exercise. The founder, acting as CEO, executed this warrant, though he had not fully read the revised terms provided by the consultant’s lawyer. Later, when the consultant needed funds for a personal legal issue, the founder loaned her $20,000, secured by her only company warrant. The security agreement described the collateral as "a warrant to purchase Common Stock...for one million shares," even though the warrant was in fact for a percentage, not a fixed number of shares.When the loan matured and the consultant defaulted, the founder caused the warrant to be transferred into his name without the consultant’s notice, and later partially exercised it. Following a merger, the founder converted some of the resulting shares and retained the rest, selling them after a lock-up period for significant proceeds. The consultant disputed the validity of the transfer and exercise, arguing that the collateral description in the pledge agreement was insufficient and that the founder’s actions constituted conversion.The Court of Chancery of the State of Delaware held the warrant was valid and enforceable as a contract for one percent of the company’s stock at exercise, but found the collateral description insufficient under the Delaware UCC, ruling that no security interest attached and the founder’s actions constituted conversion, resulting in a large damages award.The Supreme Court of the State of Delaware affirmed that the warrant was valid and enforceable, but reversed the finding that no security interest attached. The Court held that, despite the inaccurate description of "one million shares," the security agreement reasonably identified the collateral because the consultant had only one such warrant, satisfying the UCC’s requirements. The matter was remanded for further proceedings. View "Patterson v. Cannon," on Justia Law

This case centers on a contractor’s claim for a Type I differing site condition relating to a flood control project in Jefferson Parish, Louisiana. The United States Army Corps of Engineers issued a solicitation for work on the Trapp Canal, which included boring logs and cross-sections of the canal but lacked specific information about the southwest bank. Hamp’s Construction LLC, after being awarded the contract, encountered unexpected bank failures in the southwest quadrant, resulting in unsafe conditions for land-based equipment and significant delays. Hamp’s Construction submitted a request for equitable adjustment and later a formal claim, asserting that the conditions encountered were materially different from those indicated in the contract documents.The contracting officer denied Hamp’s Construction’s request and subsequent claim, concluding there was insufficient proof of a differing site condition under the relevant Federal Acquisition Regulation clause. Hamp’s Construction appealed to the Armed Services Board of Contract Appeals. After a hearing, the Board found that although Hamp’s Construction had faced unforeseen difficulties and increased costs, the contract documents did not provide representations or indications about the subsurface conditions of the southwest bank. The Board emphasized the absence of boring logs or explicit information for the area where the failures occurred and denied the appeal.The United States Court of Appeals for the Federal Circuit reviewed the Board’s legal conclusions de novo and factual findings for substantial evidence. The court held that, for a Type I differing site condition claim, the contract must affirmatively indicate conditions at the disputed site. The court determined that Hamp’s Construction could not reasonably rely on contract documents as indications for the southwest bank. The court affirmed the Board’s decision, holding that Hamp’s Construction failed to establish a threshold element of a Type I differing site condition claim. View "HAMP'S CONSTRUCTION LLC v. SECRETARY OF THE ARMY" on Justia Law

The case centers on a legal-malpractice insurance dispute arising from a failed medical-malpractice lawsuit. Lauren Bridges, acting as guardian for her minor daughter, initially filed suit in Alaska state court, alleging negligence by healthcare providers that resulted in her child’s disabilities. The case was dismissed when Bridges’s attorney, McKeen & Associates, failed to respond to summary judgment motions. Bridges subsequently brought a legal-malpractice claim against McKeen. At the relevant times, McKeen held legal-malpractice policies from Maxum Indemnity Company, StarStone Specialty Insurance Company, and Landmark American Insurance Company. All insurers declined to defend or indemnify McKeen. McKeen settled with Bridges, assigning her its rights under the policies.Bridges filed suit in the United States District Court for the Eastern District of Michigan against all three insurers, seeking a declaratory judgment and damages for breach of contract. Maxum and Landmark moved to dismiss, and the district court granted their motions, finding the policies unambiguously excluded coverage. The district court also denied Bridges’s motion to amend her complaint to add bad-faith claims and, after Bridges and StarStone stipulated to dismissal, entered final judgment regarding Maxum and Landmark. Bridges appealed only the dismissal of her claims against Maxum and Landmark.The United States Court of Appeals for the Sixth Circuit reviewed the district court’s dismissal de novo. The court held that Maxum’s policy unambiguously required notification of potential malpractice claims during the policy period, which McKeen failed to do, precluding coverage. As to Landmark, the court found that the relevant “wrongful act” occurred before the retroactive date specified in the follow-form policy, excluding coverage. Bridges’s arguments regarding policy ambiguity and procedural fairness were rejected. The Sixth Circuit affirmed the district court’s dismissal of Bridges’s claims against both Maxum and Landmark. View "Bridges v. Maxum Indemnity Company" on Justia Law

After Hurricane Ida and other storms struck Louisiana, thousands of residents hired a Houston-based law firm under contingent fee contracts to pursue damage claims. Concerns emerged regarding the firm’s handling of these cases, leading to disciplinary and sanction actions by multiple courts. The Louisiana Supreme Court suspended the firm’s lead attorney’s license and stayed the firm’s cases in state courts. Subsequently, the firm withdrew or was discharged from virtually all remaining cases, and successor law firms resolved many claims. The firm filed for bankruptcy and asserted claims against successor law firms for attorney fees and costs from settlements, sparking disputes over the validity of its contracts in light of alleged misconduct.The United States District Court for the Southern District of Texas, after a jury demand by a successor firm, withdrew the case from bankruptcy court and certified several questions to the Supreme Court of Louisiana. The parties agreed that Louisiana substantive law governs the fee dispute. No factual findings were made about the misconduct allegations; the federal court and Louisiana Supreme Court addressed questions hypothetically.The Supreme Court of Louisiana held that a contingent fee contract formed as a result of unethical or illegal conduct by an attorney is absolutely null, and the attorney cannot recover fees or costs, even on a quasi-contract or quantum meruit basis. If an attorney engages in misconduct after a valid contract is formed, recovery of fees and costs is governed by the Saucier v. Hayes Dairy Products, Inc. and O’Rourke v. Cairns framework, which allows for fee allocation based on the nature and gravity of the misconduct. The Court clarified that any person, including successor law firms, may assert absolute nullity of such contracts. The Court also declined to address procedural questions governed by federal law, such as whether a judge or jury should determine fee reductions in federal court. View "IN RE: MMA LAW FIRM, PLLC" on Justia Law

A general contractor and a subcontractor entered into agreements for the construction and renovation of a facility. The subcontracts required disputes to be resolved by arbitration pursuant to the rules of the American Arbitration Association. The subcontractor performed work and submitted invoices, but the general contractor, while timely rejecting the invoices and providing reasons, failed to include the good faith certification required by the Massachusetts prompt pay act. The contractor later paid the invoices after an arbitrator determined that the invoices were deemed approved due to the lack of timely certification. Subsequently, the contractor filed a counterclaim in arbitration seeking recoupment of those payments, arguing the invoices were not fair and reasonable.The subcontractor initially brought suit in the Massachusetts Superior Court, which was then compelled to arbitration per the contract. During arbitration, the arbitrator found that the contractor’s failure to timely certify its rejection of the invoices resulted in the invoices being deemed approved and ordered payment to the subcontractor. After payment, the arbitrator allowed the contractor’s counterclaim for recoupment. Following evidentiary proceedings, the arbitrator ruled in favor of the contractor, awarding partial recoupment. The subcontractor moved in the Superior Court to vacate this award, arguing that the arbitrator exceeded his authority. Relying on J.C. Cannistraro, LLC v. Columbia Construction Co., the Superior Court judge vacated the recoupment portion of the arbitration award, finding that the contractor had asserted defenses before paying the invoices, contrary to precedent.The Supreme Judicial Court of Massachusetts reviewed the matter on direct appellate review. It held that the arbitrator did not exceed his authority because the award was not prohibited by law nor did it violate public policy. The court determined that the prompt pay act did not expressly prohibit recoupment in these circumstances and that the arbitrator’s actions were within the broad scope granted by the parties’ agreement and the arbitration rules. The judgment vacating the arbitration award was reversed and the matter remanded for confirmation of the arbitration award. View "J.C. Cannistraro, LLC v. Columbia Construction Co." on Justia Law

A man was charged with several serious crimes and, at trial, was represented by attorneys from a law firm. His mother paid $300,000 in legal fees to the firm, based on representations made by his defense counsel about the services to be provided. The man was convicted of some charges and sentenced to prison. After an unsuccessful appeal, he and his mother sued the defense attorneys and their firm for professional negligence, breach of fiduciary duty, breach of contract, negligent misrepresentation, and fraud. They claimed that the attorneys had provided ineffective representation, failed to deliver on promises related to legal services and use of retainer funds, overcharged, failed to account for fees, and did not return unearned funds.The trial court dismissed all claims with prejudice under Texas Rule of Civil Procedure 91a, finding that the mother had no standing to sue because she was not a client, and that the Peeler doctrine barred all of the son’s claims because he had not been exonerated. The Court of Appeals for the Third District of Texas affirmed, holding that the mother lacked standing and that the Peeler doctrine categorically barred all of the son’s claims, including those about excessive fees and failure to account.The Supreme Court of Texas clarified that Peeler v. Hughes & Luce bars a convicted criminal defendant from suing defense counsel for legal malpractice unless exonerated, but does not categorically bar contract or fraud claims unrelated to the conviction. The court held that the mother had standing to bring claims for her own direct economic losses, such as overpayment or failure to return unearned fees, but could not bring claims based on an attorney-client relationship. The court affirmed the dismissal of some claims, reversed as to others, and remanded to the court of appeals to consider additional issues, including whether some claims are really fractured malpractice claims and statute of limitations defenses. View "CARDEN v. MINTON, BASSETT, FLORES & CARSEY, P.C." on Justia Law