Justia Contracts Opinion Summaries

Copper City Gaming, Inc. alleged that in July 2022, Eric Allen entered into a lease agreement with the corporation, resulting in four payments totaling $14,400. Copper City claimed these payments were fraudulent, part of a conspiracy between Eric and Russ Allen, and asserted causes of action for fraud, violation of the Montana Consumer Protection Act, breach of contract, unjust enrichment, and civil conspiracy. The complaint specifically alleged the lease used the wrong address and corporate name, Eric lacked authority to sublease or failed to provide usable space, and Copper City never stored property there.Previously, a related action (DV-22-206) involved disputes between shareholder groups over management and use of corporate funds. That action began in Copper City’s name but, by court order, Russ and Camy Allen were substituted as plaintiffs, and Copper City was no longer a named party. The parties reached a mediated settlement, which included a Mutual General Release and Settlement Agreement, and a Special Master’s Order waiving certain business dispute claims, including storage-unit fees. The Special Master dismissed the action with prejudice as fully settled.The Supreme Court of the State of Montana reviewed the District Court’s order granting Eric Allen’s motion to dismiss under M. R. Civ. P. 12(b)(6) on collateral estoppel grounds. The Supreme Court held that the complaint and materials properly considered at the pleading stage did not conclusively establish that the prior adjudication decided the identical issues now raised, that Copper City was adequately represented in the prior action, or that Copper City had a full and fair opportunity to litigate those issues. The Court also found the District Court erred by considering matters outside the pleadings without converting the motion to summary judgment under Rule 12(d). The Supreme Court reversed the dismissal and remanded for further proceedings. View "Copper City Gaming v. Allen" on Justia Law

SWN Production Co., LLC leased land from Bluebeck Ltd. and paid royalties for gas extracted from the property. A dispute emerged over the lease’s performance, leading SWN Production Co. to seek a declaratory judgment on whether it was in default, whether Bluebeck was obligated to provide information needed to cure alleged defaults, and whether lease forfeiture required agreement or a judicial finding of default. The underlying issue concerned whether the lease could be terminated based on alleged defaults, which depended on future events.The United States District Court for the Middle District of Pennsylvania found the complaint unripe because any lease termination was contingent on future developments. As a result, it dismissed the action without prejudice, concluding there was no case or controversy suitable for judicial resolution under Article III. After the dismissal, Bluebeck Ltd. filed a motion for attorney’s fees, costs, and expenses based on a fee-shifting provision in the lease. The District Court denied this motion, reasoning that Bluebeck was not a prevailing party since the dismissal did not finally resolve the parties’ rights in its favor.The United States Court of Appeals for the Third Circuit reviewed the District Court’s assumption of jurisdiction and the denial of the fee motion. The appellate court determined that once the District Court concluded it lacked Article III subject-matter jurisdiction due to unripeness, it had no authority to rule on the fee motion. The main holding by the Third Circuit is that a federal court lacking Article III jurisdiction over the underlying claim cannot adjudicate a motion for attorney’s fees, costs, or expenses based solely on a contractual fee-shifting clause. The Third Circuit vacated the District Court’s order and remanded with instructions to dismiss Bluebeck’s fee motion. View "SWN Production Co LLC v. Blue Beck Ltd" on Justia Law

An airline operating among the Hawaiian Islands faced severe financial difficulties over several years, leading to its abrupt shutdown in November 2017. The airline had previously been owned by a trust affiliated with a prominent individual, then partially sold to entities controlled by other businessmen. When the airline closed, employees received only one day's notice and did not receive their final paychecks. Following the closure, a Chapter 7 bankruptcy trustee was appointed. Together with two unions representing affected employees, the trustee initiated adversary proceedings against the airline’s former owners, directors, and lenders, alleging violations of Hawaii’s Dislocated Workers Act (DWA) and the federal WARN Act for failure to provide the required notice and compensation. Additional claims included breach of fiduciary duties and requests for equitable remedies such as veil piercing and equitable subordination.The proceedings began in the United States Bankruptcy Court for the District of Hawaii, but the District Court for the District of Hawaii withdrew the reference, consolidated the cases, and conducted a jury trial. The district court granted judgment as a matter of law for some claims and allowed others to proceed. The jury returned mixed verdicts, finding some defendants liable for statutory and fiduciary duty violations, but the court denied punitive damages and limited recovery to avoid double compensation. The court also ruled on equitable remedies, including piercing the corporate veil and equitably subordinating certain loans, and ordered contribution from a third-party defendant.The United States Court of Appeals for the Ninth Circuit reviewed the district court’s judgment. It held that it had jurisdiction under 28 U.S.C. § 1291. The panel affirmed the trustee’s and unions’ Article III standing. It reversed in part on fiduciary duty claims, concluding that minority stakeholders and affiliated entities could owe fiduciary duties and be deemed “employers” under the DWA. The court clarified the statutory definition of “employer” and the scope of the DWA’s safe harbor defense, ruling it was unavailable absent a binding divestiture. The panel affirmed evidentiary rulings, vacated the nominal damages award due to erroneous jury instructions, affirmed the prohibition of punitive damages, and upheld the equitable remedies and contribution order. The judgment was affirmed in part, reversed in part, and remanded for further proceedings. View "KANE V. PACAP AVIATION FINANCE, LLC" on Justia Law

The plaintiffs purchased a residential lot from a developer and later alleged that defective grading and drainage in the subdivision caused water and erosion damage to their property. They claimed that the developer and seller deviated from an approved drainage plan, redirecting stormwater onto their lot. The plaintiffs discovered the source of the problem several years after purchasing the property, following a heavy rainstorm. Their claims included negligence, breach of contract, and breach of the implied warranty of workmanlike construction.The District Court of Oklahoma County conducted a bench trial. After the plaintiffs rested their case, the defendants moved for a directed verdict and argued that the tort and warranty claims were barred by Oklahoma’s ten-year statute of repose (12 O.S. § 109), and the contract claim was barred by the five-year statute of limitations (12 O.S. § 95). The trial court found that the improvement causing the harm was substantially completed more than ten years before suit, and that the contract claim accrued on the date the lot was conveyed. The trial court entered judgment for the defendants on all claims.The Supreme Court of the State of Oklahoma reviewed the appeal. It held that the statute of repose begins to run upon substantial completion of the specific improvement alleged to have caused harm, not the completion of the overall development. The only evidence of substantial completion was uncontroverted, showing completion more than ten years before suit, barring the tort claims. The implied warranty and contract claims were also time-barred by the statute of limitations, and Turner & Company was not a party to the contract. The judgment of the District Court was affirmed. View "ESCH v. TURNER & COMPANY, INC." on Justia Law

The dispute centers on the division of a government pension earned by an employee during a lengthy period of cohabitation before marriage. The employee worked at the East Bay Municipal Utility District (EBMUD), contributing to his pension from 1987 to 2018. He and his partner began living together in 1993, executed a domestic partnership affidavit for benefits, purchased a home jointly, and eventually married in 2003. After their relationship ended, the partner sought legal separation and also filed a civil action alleging breach of an oral agreement made during their cohabitation period, in which they agreed to pool their earnings and share equally any property acquired as a result.The Superior Court of the City and County of San Francisco consolidated the civil and divorce proceedings. It bifurcated the case, first trying the claims regarding the oral agreement. After trial, the court found that an implied-in-fact (Marvin) agreement existed during the cohabitation period, entitling each party to an equal share of property acquired, including pension contributions and accumulations. The employee moved to clarify that statutory protections made his pension “unassignable” and “exempt from execution,” but the court held that the partner was entitled to half of the pension benefits accrued during the Marvin period, and could receive payment upon distribution or via other assets after actuarial valuation.The Court of Appeal of the State of California, First Appellate District, Division Five, reviewed whether Public Utilities Code section 12337 barred the partner from sharing in pension benefits accrued during cohabitation. The court held that section 12337 does not prohibit the partner from receiving a share of pension contributions and accumulations, because her claim was based on ownership arising from the Marvin agreement, not as a creditor or assignee. The trial court’s order was affirmed. View "Seiwald v. Irias" on Justia Law

Linda Keagle and her late husband obtained two loans in 2007 and 2008, totaling $450,000, from MLA Capital, LLC and Encarnacion Alvarez and her late husband. Both loans were evidenced by promissory notes with definite maturity dates in 2012 and 2013. The Keagles failed to make payments before the maturity dates, and subsequently, from August 2018 to March 2020, MLA Capital and the Alvarezes received monthly checks from C&C Organization, a company with which Linda was affiliated.MLA Capital and Encarnacion Alvarez filed a lawsuit in 2022 alleging breach of the promissory notes and related common counts. Linda moved for summary judgment in the Superior Court of San Bernardino County, arguing the claims were untimely under four-year and two-year statutes of limitations. She contended the payments made by C&C Organization did not restart or toll the limitations period, as she neither authorized nor signed the checks. Plaintiffs opposed, asserting a six-year statute of limitations applied and that the checks constituted partial payments restarting the limitations period. The trial court granted summary judgment for Linda, finding no evidence Linda had agreed to bear responsibility for the loans after maturity or authorized the payments.The California Court of Appeal, Fourth Appellate District, Division One, reviewed the case and held that a six-year statute of limitations under California Uniform Commercial Code section 3118 applies to the promissory note claims and related common counts, as it is more specific and recent than general contract limitations statutes. The court further determined there is a triable issue of material fact as to whether the payments from C&C Organization constituted partial loan repayments authorized by Linda, which could have restarted the limitations period under Code of Civil Procedure section 360. The judgment was reversed, and the trial court was instructed to deny summary judgment. View "MLA Capital, LLC v. Keagle" on Justia Law

Several employees of the Space and Missile Systems Center of the United States Air Force brought a qui tam action under the False Claims Act against Jeremy Burton, the Center’s former Deputy Chief Information Officer. The plaintiffs alleged that Burton, in coordination with a defense contractor, manipulated contract awards to ensure profits were shared in violation of federal regulations, thereby submitting fraudulent payment claims to the government.Initially, Burton moved to dismiss the claims, arguing that 31 U.S.C. § 3730(e)(1) barred the suit because he was a member of the armed forces, which would preclude jurisdiction over actions brought by one member of the armed forces against another arising out of military service. The United States District Court for the Central District of California first agreed and dismissed the claims against Burton. However, after further briefing on the status of the parties, the district court reconsidered and vacated its earlier order, concluding that Burton was a civilian employee and not a member of the armed forces. The suit was permitted to proceed, and Burton appealed before the case reached final judgment.The United States Court of Appeals for the Ninth Circuit examined whether it had jurisdiction to review the interlocutory order denying Burton’s defense under section 3730(e)(1). The court held that the district court’s order did not meet the requirements of the collateral order doctrine, specifically because it was not effectively unreviewable on appeal from a final judgment. The statute at issue was determined to be a jurisdictional bar, not an immunity from suit, and thus not subject to interlocutory appeal. The Ninth Circuit dismissed the appeal for lack of jurisdiction. View "UNITED STATES V. BURTON" on Justia Law

A technology company developed an artificial intelligence system and imposed contractual and technical restrictions to prevent its use for fully autonomous lethal military operations and mass domestic surveillance. The company had previously adapted its product to meet some government needs but refused to remove these two key restrictions when the Department of War (formerly the Department of Defense) sought contractual terms allowing all lawful uses of the AI system. This disagreement coincided with a dispute over the product’s use in a sensitive military operation and previous incidents where the AI’s restrictions prevented it from fulfilling government requests. As a result, the Secretary of War determined that continued use of the AI posed a national security risk and ordered its removal from the Department’s supply chain under the Federal Acquisition Supply Chain Security Act of 2018.The Department promptly notified the company, offered an opportunity for reconsideration, and began implementing the exclusion. The company petitioned the United States Court of Appeals for the District of Columbia Circuit for review and raised statutory and constitutional challenges, arguing that the exclusion was arbitrary, beyond statutory authority, and violated due process and First Amendment rights. The company also sought a stay, which was denied, and later requested rescission, which was also denied by the Secretary.The United States Court of Appeals for the District of Columbia Circuit held that it had jurisdiction under the statute to review the procurement action. The court found the Department’s determination reasonable, concluding that the company’s ability and willingness to restrict the AI’s use posed a covered “supply chain risk” under the statute, even without evidence of malicious intent. The court also held that less intrusive measures were not reasonably available, and that any procedural deficiencies in notice did not prejudice the company. The court further held that the exclusion did not violate the Fifth or First Amendments. The petitions for review were denied. View "Anthropic PBC v. United States Department of War" on Justia Law

A privately owned railroad company was engaged by the Nevada Department of Transportation to build a high-speed passenger rail line between Southern California and Las Vegas, Nevada. To fund this $12 billion project, the company sought and received a $3 billion federal grant from the Federal Railroad Administration (FRA) under the Infrastructure Investment and Jobs Act. The Act contains a “Buy America” requirement, generally mandating that federally funded projects use goods produced in the United States, but it allows waivers if domestic goods are unavailable or unsatisfactory. The railroad company solicited bids for high-speed trains, and only two manufacturers responded: one offering to build most trains domestically but at a lower maximum speed, and another proposing to build the first two trains abroad to meet the project’s higher speed requirement, before shifting production to the U.S.After reviewing the bids, the FRA proposed to waive the Buy America requirement for either bid, but ultimately finalized a waiver only for the foreign-manufactured trains, based on its finding that no domestic manufacturer could produce trains at the required speed. The railroad company then contracted with the foreign manufacturer. The domestic manufacturer, having lost the contract, challenged the waiver in the United States District Court for the District of Columbia, arguing it was unlawful and arbitrary. The district court dismissed the complaint, finding the domestic manufacturer lacked standing.On appeal, the United States Court of Appeals for the District of Columbia Circuit held that the domestic manufacturer had standing, as it suffered a concrete economic injury traceable to the waiver and redressable by court action. However, the court determined that the waiver was both lawful and reasonable under the statute, as the FRA correctly found no domestic producer could supply the required high-speed trains. The appellate court affirmed the district court’s judgment, converting it from a jurisdictional dismissal to a decision on the merits. View "Alstom Transportation, Inc. v. Federal Railroad Administration" on Justia Law

A Swedish private equity firm specializing in veterinary products sought to acquire a company that manufactured orthopedic implants for animals. At the time of negotiations, the target company was involved in ongoing patent litigation initiated by a third party, which posed significant financial risk. To address this uncertainty, the parties included a broad indemnification provision in their agreement, requiring the sellers to cover losses “as a result of, or in connection with” the patent litigation. After the sale closed, the litigation expanded to include additional products and patents, culminating in a $70 million settlement and a license for one of the company’s products. The buyer financed the settlement with a loan. Most former owners settled indemnity claims, but the company’s founder did not, prompting the new owners to sue for enforcement of the indemnity.The Superior Court of the State of Delaware initially granted summary judgment to the buyers on certain defenses but otherwise denied both parties’ motions, proceeding to trial. Following trial, the court held that the founder was required to indemnify the buyers for damages arising from the patent litigation, but not for the cost of the patent license. It awarded only half of the requested attorneys’ fees for patent litigation, citing allocation challenges, and also denied recovery of fees incurred to enforce the indemnification provision. The court did, however, award prejudgment interest, including on the loan interest expense.On appeal, the Supreme Court of the State of Delaware affirmed in part and reversed in part. It held that the indemnification provision covered losses arising from post-transaction conduct and did not violate public policy, and that the implied covenant defense was inapplicable. The court found error in awarding prejudgment interest on the loan-interest expense, which resulted in a double recovery. For the cross-appeal, it held that the buyers were entitled to the license cost and the full amount of attorneys’ fees from the patent litigation, but not fees for enforcing the indemnification provision. The case was remanded for further proceedings. View "Gendreau vs Movora LLC" on Justia Law