Justia Contracts Opinion Summaries

Lakeshore Investments loaned over $1.7 million to NOW Solutions, Inc., secured by a promissory note and collateral agreement. When NOW Solutions defaulted, the parties amended the payment terms multiple times, eventually adding Vertical Computer Systems as a co-debtor. Despite these amendments, NOW Solutions fell behind on payments again, and Lakeshore filed a lawsuit for breach of contract. During litigation, the parties entered into a settlement agreement: NOW Solutions and its parent agreed to pay $450,000 in three installments, with a provision that failure to pay would entitle Lakeshore to a stipulated judgment of $1.5 million plus interest.After defendants defaulted on the final installment and failed to cure their default, Lakeshore requested entry of the $1.5 million judgment in Los Angeles County Superior Court. Defendants objected, arguing the amount was an unenforceable penalty. The Superior Court granted Lakeshore’s request without making specific findings beyond confirming the default.On appeal, the California Court of Appeal, Second Appellate District, Division Eight, considered whether the $1.5 million stipulated judgment was a valid liquidated damages provision or an unenforceable penalty under Civil Code section 1671. The appellate court held that, because the $1.5 million amount bore no reasonable relationship to the damages that could have been anticipated from breach of the settlement, it constituted a penalty and was unenforceable. The court reversed the trial court’s order and remanded with instructions to determine the actual damages suffered by Lakeshore as a result of the breach. The court awarded costs on appeal to the defendants. View "Lakeshore Investment LLC v. Now Solutions, Inc." on Justia Law

Two foreign nationals from the United Kingdom rented vehicles from a car rental company during separate visits to the United States. Each used a third-party website to reserve vehicles and selected a package that included supplemental liability insurance. Upon arriving at the rental location, they signed rental forms and received a “rental jacket” that contained additional terms, including a statement that supplemental liability insurance would be provided via an excess automobile policy and an arbitration clause requiring most disputes to be resolved through arbitration.Later, the customers believed the company did not actually secure the promised insurance policy but intended to pay claims from its own funds. They filed a putative class action in the U.S. District Court for the District of New Jersey, asserting breach of contract, fraudulent misrepresentation, and a violation of Florida’s consumer protection law. The District Court dismissed the fraud and statutory claims but allowed the contract claim to proceed. The defendants, Budget and its parent company, reserved their right to arbitrate and pursued discovery. After deposing the plaintiffs, the defendants moved to compel arbitration, arguing the plaintiffs were aware of the arbitration clause when they received the rental jackets.The District Court denied the motion, finding that by litigating into discovery before moving to compel arbitration, the defendants had impliedly waived their right to arbitrate. On appeal, the United States Court of Appeals for the Third Circuit reviewed the waiver determination de novo. The Third Circuit held that the defendants did not impliedly waive their right to arbitrate. Because factual development was necessary to determine arbitrability under a prior circuit decision, the defendants’ conduct—reserving their arbitration right and moving to compel after depositions—was not inconsistent with an intent to arbitrate. The Third Circuit vacated the District Court’s order and remanded for further proceedings on the motion to compel arbitration. View "Parkin v. Avis Rent a Car System LLC" on Justia Law

A Puerto Rican distributor of HVAC products brought suit against a Miami-based manufacturer after their commercial relationship deteriorated. The distributor alleged that the manufacturer’s actions impaired its distribution rights under Puerto Rico’s Dealer’s Act (Law 75). After the distributor dismissed claims against certain non-diverse defendants, the manufacturer removed the case to federal court and asserted a counterclaim alleging the distributor owed over $235,000, as well as seeking a declaratory judgment that it had just cause to terminate the relationship.The United States District Court for the District of Puerto Rico granted summary judgment to the manufacturer on the Law 75 claim, finding in its favor, and dismissed the manufacturer’s declaratory judgment counterclaim as unripe. The court denied summary judgment on the remaining damages counterclaim, finding material factual disputes and setting it for trial. The distributor sought entry of final judgment under Rule 54(b), which the court denied due to overlap between the claims. The distributor’s attempt to obtain appellate review via a petition under Rule 5 was also denied by the United States Court of Appeals for the First Circuit. Subsequently, the manufacturer moved to voluntarily dismiss its remaining counterclaim without prejudice. The district court granted that motion, dismissing the counterclaim without prejudice and denying the distributor’s requests for dismissal with prejudice or for attorney fees and costs. The court then entered judgment dismissing the distributor’s claims with prejudice and the manufacturer’s counterclaim without prejudice.On appeal, the United States Court of Appeals for the First Circuit determined that it lacked appellate jurisdiction. The court held that a voluntary dismissal without prejudice does not produce a final decision under 28 U.S.C. § 1291 when the dismissed claim could be revived in the same district court. Consequently, there was no final, appealable judgment, and the appeal was dismissed. View "Air-Con, Inc. v. Daikin Applied Latin America, LLC" on Justia Law

The dispute centers on a business relationship involving ownership interests in Delaware Valley Regional Center, an EB-5 investment business. Joseph P. Manheim, holding a controlling interest through West 36th, Inc., eliminated Young Min Ban’s interests by unilaterally enacting a bylaw that allowed him to acquire Ban’s shares and redeem a partnership interest at self-determined values. Ban, who owned a minority share of West 36th, Inc. and a significant partnership interest in a related entity, sued for breach of fiduciary duty, unjust enrichment, and conversion, seeking damages equivalent to the fair value of his lost interests.The Court of Chancery of the State of Delaware found Manheim liable for breaching his duty of loyalty and awarded Ban $6,898,612 in damages, declining to consider Ban’s expert’s supplemental valuation as it was based on new inputs not timely disclosed. After trial, Ban moved for an award of attorneys’ fees and expenses, arguing for the first time that Manheim’s pre-litigation conduct warranted fee shifting under the bad-faith exception to the American Rule. The Court of Chancery granted this, treating fees as an element of damages due to Manheim’s conduct.On appeal, the Supreme Court of the State of Delaware affirmed the lower court’s damages determination and its exclusion of the supplemental valuation, finding no abuse of discretion. However, the Supreme Court reversed the award of attorneys’ fees and expenses. It held that a claim for attorneys’ fees as damages based on pre-litigation conduct must be raised before trial to provide adequate notice and an opportunity for the opposing party to defend. Because Ban did not raise this claim until after trial, the Supreme Court concluded it was waived. The case was remanded for further proceedings consistent with this ruling. View "Ban v. Manheim" on Justia Law

Two investigative journalists, on assignment for a nonprofit media organization known for undercover reporting, infiltrated Democratic political consulting operations in 2016 using false identities. One reporter, posing as a philanthropist, met with a political consultant who then arranged for his colleague to hire the second reporter, also undercover, as an unpaid intern at the consultant's firm. The intern secretly recorded conversations and internal meetings over eight days, gaining access to nonpublic information. The media organization later published a video series alleging a conspiracy to incite violence at political events, using footage from both public interactions and the intern’s covert recordings.After the video’s release, major clients of the consulting firm terminated their contracts, citing concerns about scandal and the security breach. The consulting firm and its principals sued the journalists and their organizations in the United States District Court for the District of Columbia, alleging fraudulent misrepresentation, conspiracy, and violations of federal and D.C. wiretapping laws. The district court granted summary judgment for the defendants on some claims but allowed others to proceed to trial. A jury found for the plaintiffs on the remaining claims and awarded damages for lost contracts and statutory damages for wiretapping.The United States Court of Appeals for the District of Columbia Circuit reviewed the verdict. It held that the First Amendment barred damages based on losses caused by the publication’s protected speech, as the plaintiffs failed to prove that the unprotected conduct (the infiltration and covert recording) was the predominant cause of their damages. The court also held that the intern did not owe a fiduciary duty to the consulting firm under D.C. law, and therefore the wiretapping claims could not stand. The court reversed the district court’s denial of judgment as a matter of law and vacated the damages awards. View "Democracy Partners, LLC v. O'Keefe" on Justia Law

A property dispute arose when the estate of William King sold a property on Broad Street in Gadsden to Mobile Investments, LLC, in 2019. Corporate Pharmacy Services, Inc. (CPS), which had originally leased the property from King, claimed the lease included an option to purchase the property and that King’s estate improperly sold it without giving CPS the opportunity to exercise its right of first refusal. CPS sued Mobile Investments and The Broadway Group, LLC (TBG), alleging breach of the lease and seeking specific performance of the purchase option. After Mobile Investments and TBG repeatedly failed to comply with discovery requests and court orders, the Etowah Circuit Court entered a default judgment against them, ordering that CPS was entitled to purchase the property for $110,000.Mobile Investments and TBG first moved for relief from the default judgment, which was denied. They appealed to the Supreme Court of Alabama, arguing they had not been properly informed by their counsel about discovery orders and their consequences. The Supreme Court of Alabama affirmed the trial court’s judgment. Afterward, Mobile Investments and TBG filed a Rule 60(b)(4) motion, later amended to add Rule 60(b)(6) grounds, seeking to set aside the judgment as void for lack of due process and to correct the property description. The trial court denied the motion in large part but scheduled a further hearing to resolve issues regarding the legal description of the property and the corresponding purchase price.Before the trial court could complete its proceedings on these unresolved issues, Mobile Investments and TBG appealed again to the Supreme Court of Alabama. The Supreme Court of Alabama held that because the trial court had not yet issued a final judgment—leaving substantive issues pending—it lacked jurisdiction over the appeal. Accordingly, the appeal was dismissed. View "Mobile Investments, LLC v. Corporate Pharmacy Services, Inc." on Justia Law

Two companies competed for a Federal Aviation Administration (FAA) hardware contract related to air traffic control tower simulators. Adacel, having already secured a related software contract, knew that its own software would be used, giving it an informational advantage over Adsync, which was unaware of the software selection. Adacel’s bid was lower, and it initially won the hardware contract. Adsync protested, and the FAA’s Office of Dispute Resolution for Acquisition (ODRA) found Adacel’s advantage unfair. The FAA allowed Adsync to revise its bid with knowledge of the software, but restricted changes to those attributable to the new information and barred Adacel from revising its bid.After Adsync revised its proposal with significant price reductions, the FAA’s contracting team accepted most, but rejected about $734,000 in reductions pertaining to basic hardware, finding Adsync had failed to justify their connection to the software selection. As a result, Adacel’s bid remained lower, and it again won the contract. Adsync filed a second protest with ODRA, challenging the FAA’s rejection of some price reductions, the technical evaluation, and the best value determination. ODRA concluded that the FAA had a rational basis for its decisions and recommended denial of the protest. The FAA adopted ODRA’s recommendations.Adsync sought review in the United States Court of Appeals for the District of Columbia Circuit. The court held that the FAA did not violate its Acquisition Management System Guidance’s “price realism” provision, as it was not applicable to the remedial rebid context. The court further found substantial evidence supported the FAA’s rejection of certain price reductions and concluded that ODRA did not abuse its discretion in denying bid and proposal costs. Accordingly, the petition was denied. View "Adsync Technologies, Inc. v. FAA" on Justia Law

A company operating a gas station in Washington entered into a series of agreements with a petroleum refiner and a logistics company. The agreements allowed the company to rebrand its station and market motor fuel under the refiner’s trademarks, even though the refiner did not supply the actual fuel. Instead, the logistics company served as an intermediary, and fuel was sourced from a third party. Later, the refiner and logistics company claimed the agreements were terminated, demanding the removal of the trademarks. The gas station operator refused, alleging that the termination violated the Petroleum Marketing Practices Act (PMPA), which regulates the termination and nonrenewal of petroleum marketing franchises.The United States District Court for the Western District of Washington dismissed the gas station operator’s PMPA claim. The court held that no PMPA franchise existed because the refiner did not supply the fuel to either the operator or the logistics company. The court reasoned that the statute required the refiner to be the supplier of the fuel for a franchise relationship to exist under the PMPA.The United States Court of Appeals for the Ninth Circuit reviewed the dismissal de novo. It held that the PMPA does not require the refiner to supply the actual fuel; rather, a franchise exists if there is a contract authorizing the use of the refiner’s trademark in connection with the sale of motor fuel. The court determined that the operator plausibly alleged franchise relationships with both the refiner and the logistics company, based on the mutual obligations in the agreements and the statutory definitions. The Ninth Circuit reversed the district court’s dismissal of the PMPA claims and remanded the case for further proceedings. View "CAN-AM FUEL DISTRIBUTION, LLC V. SINCLAIR OIL, LLC" on Justia Law

A dispute arose over a 2,300-acre land development project in Washington County, Utah. The owners, Keith and Lorin Walker, planned a large residential community but faced foreclosure following the 2008 financial crisis. To save the project, they entered into a contract with Western Mortgage & Realty Company, which agreed to clear the land’s title and transfer ownership to a jointly controlled entity. Western failed to form the promised entity, leading to litigation. Western sued to quiet title, and the Walkers counterclaimed for breach of contract and fiduciary duty, among other claims.The Fifth District Court held a bench trial, finding in favor of the Walkers on their breach of contract and fiduciary duty claims. The court imposed a constructive trust, awarded the Walkers monetary damages, and granted attorney fees as consequential damages for the breach of fiduciary duty. The Walkers were instructed to seek attorney fees through a post-trial motion under Utah Rule of Civil Procedure 73. After trial, the parties signed a stipulation waiving appeals on prior rulings but reserving the right to appeal any future rulings regarding attorney fees.In their post-trial motion, the Walkers, for the first time, disclosed a hybrid contingency-hourly fee arrangement with their counsel. The district court accepted this late disclosure, finding that it was either for good cause or harmless, and awarded the Walkers consequential damages based on the contingency fee, increasing their monetary award and interest in the trust.On direct appeal, the Supreme Court of the State of Utah reversed the district court’s award of the contingency fee as consequential damages. The court held that attorney fees sought as consequential damages require disclosure under Rule 26, and their foreseeability and amount must be proven at trial. The Walkers’ failure to disclose and prove these elements was neither harmless nor for good cause. The Supreme Court instructed the district court to modify the damages award accordingly. View "Western Mortgage v. Walker" on Justia Law

Two North Dakota counties jointly owned a detention facility and entered into a contract with a construction company to build it, hiring an architectural firm to specify and approve materials, including paints. In early 2017, during a walk-through, a county official noticed that paint on a bunk bed was peeling off easily, exposing bare metal with no visible primer. He documented the issue and notified both the architect and the painting subcontractor, who suggested the paint had not cured. Despite this, the paint problems persisted and were reported as a widespread issue months later; the counties continued to express concerns and sought to identify responsibility.The counties later sued the architect and other parties for breach of contract, alleging failure to ensure proper paint specifications. Claims against all other defendants were resolved by settlement, leaving the architect as the sole defendant. The District Court of Burleigh County, South Central Judicial District, granted summary judgment in favor of the architect, concluding that the six-year statute of limitations applied. The court found that the counties were on notice of a potential claim as of the February 2017 walk-through and that their action, filed in 2023, was untimely. The court also declined to consider equitable estoppel, as it was not raised before the trial court.On appeal, the Supreme Court of North Dakota reviewed the summary judgment de novo. The court agreed that the discovery rule triggered the statute of limitations in February 2017, when the counties became aware of facts that would place a reasonable person on notice of a potential claim. The court held that the counties’ claim was time-barred and affirmed the district court’s dismissal, declining to address arguments inadequately raised or preserved for appeal. View "Burleigh Cty v. Comstock Construction" on Justia Law