Justia Contracts Opinion Summaries

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Auto Owners Insurance, Inc. ("Auto Owners"), appealed a circuit court's denial of its motion to dismiss or, in the alternative, to compel arbitration in an action against it filed by Blackmon Insurance Agency, Inc. Blackmon served as an agent for Auto Owners since 1995. The agency agreement the parties signed provided for commission to Blackmon for the sale of Auto Owners policies; the agreement also included an arbitration agreement should there be a dispute among them. In 2010, Blackmon filed a complaint in the circuit court seeking a declaratory judgment as to the arbitrability of a dispute between Blackmon and Auto Owners as to which Auto Owners had already initiated arbitration proceedings. In its complaint, Blackmon alleged that Auto Owners had initiated the arbitration proceedings against Blackmon in Eaton County, Michigan. Blackmon also alleged that in the Michigan arbitration proceeding Auto Owners bases its claims on a 2005 document and 2009 supplemental agreement. Auto Owners moved to dismiss, or in the alternative, to compel arbitration. The circuit court denied Auto Owners' motion, and Auto Owners appealed. Upon review of the documents at the heart of this dispute, the Supreme Court concluded the circuit court erred in denying Auto Owners' motion to compel arbitration. The Court therefore reversed the circuit court and remanded the case with instructions that the lower court grant the motion and either issue a stay of these proceedings pending arbitration, or dismiss the case.

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Town & Country Property, L.L.C., and Town & Country Ford, L.L.C. (collectively referred to as "T&C") appealed a circuit court's grant of summary judgment Amerisure Insurance Company and Amerisure Mutual Insurance Company (collectively referred to as "Amerisure"), holding that Amerisure was not obligated to pay a $650,100 judgment entered on a jury verdict in favor of T&C and against Amerisure's insured, Jones-Williams Construction Company, because, the trial court reasoned, the faulty construction of the T&C facility upon which the judgment was based was not an "occurrence" covered under the commercial general-liability ("CGL") insurance policy Amerisure had issued Jones-Williams. On October 21, 2011, the Supreme Court affirmed in part the judgment entered by the trial court, agreeing that faulty construction did not in and of itself constitute an occurrence for CGL-policy purposes and that, accordingly, "Amerisure was not required to indemnify Jones-Williams for the judgment entered against it insofar as the damages represented the costs of repairing or replacing the faulty work." On remand, the parties filed briefs with the trial court: T&C argued that the vast majority of the $650,100 judgment should be attributed to covered damage, while Amerisure argued that the damages T&C sought for the repair and/or replacement of defective construction exceeded the amount of the verdict and thus none of the judgment should be attributed to covered damage to personal property or nondefective portions of the T&C property. In its order resolving the issue on remand, the trial court identified $257,500 in damages claimed by T&C at trial as representing the repair or replacement of faulty construction. It therefore subtracted that amount from the $650,100 awarded by the jury and awarded T&C $392,600 plus interest and costs. Upon a review of the record, the Supreme Court found that the $392,600 judgment entered by the trial court was not supported by the evidence. The judgment entered by the trial court on remand was accordingly reversed, and the case was again remanded for the trial court to enter a final judgment in favor of T&C for the amount of damages the Supreme Court deemed T&C was entitled to: $600.

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Plaintiff-Appellant Randy Kramer initiated a breach of contract action against Mike D. Murphy and the William F. Murphy Self-Declaration of Trust (Trust). Tri-State Ethanol, LLC owned an ethanol plant in Rosholt, South Dakota. Kramer was one of the members and managers of Tri-State Ethanol. Kramer was also a member of White Rock Pipeline, LLC, which owned a pipeline that supplied natural gas to Tri-State Ethanol. In order to comply with various federal regulations, Tri-State Ethanol determined it was necessary to purchase the membership interests of Kramer, Murphy, Woods, and the Trust. To accomplish this, Tri-State Ethanol entered into a loan agreement (Loan Agreement) with Murphy and the Trust. Tri-State Ethanol was unable to meet its financial obligations and eventually filed for Chapter 11 bankruptcy. During the course of the bankruptcy proceedings, Murphy and the Trust reached a settlement agreement regarding payment of the Loan Agreement and the Disbursement Agreement. Murphy and the Trust, through its trustee, represented to the bankruptcy court that they would use the settlement proceeds to pay Kramer the amounts owed under the Disbursement Agreement. The bankruptcy court approved the settlement agreement. After the settlement proceeds from Tri-State Ethanol’s bankruptcy estate were distributed, Murphy and the Trust refused to pay Kramer the full amount listed in the Disbursement Agreement. Kramer then filed a complaint against Murphy and the Trust for breach of the Disbursement Agreement. Murphy filed a motion to dismiss on the grounds of improper venue. He claimed that the forum-selection clauses contained in the Loan Agreement, the Balloon Note, and the Promissory Note controlled for any suit brought on the Disbursement Agreement. The circuit court agreed and dismissed the case. It found that while the Disbursement Agreement itself had no forum-selection clause, the other three agreements contained forum-selection clauses providing that the Fourteenth Judicial District in Rock Island County, Illinois was the proper forum. The circuit court reasoned that the agreements must be considered as a whole. After examining each of documents collectively as one contract, the Supreme Court held that the trial court did not err in finding that the parties intended the venue for any suit on the Disbursement Agreement to be the Fourteenth (14th) Judicial District in Rock Island County, Illinois. The circuit court’s dismissal of this case was affirmed.

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The Cumberland Teachers Association (union), appealed to the Supreme Court that confirmed an arbitrator's award in favor of the Cumberland School Committee (school committee). After protracted contract negotiations, the school committee and the union agreed on a three-year collective bargaining agreement (CBA) that would govern their relations for the 2006-2007, 2007-2008 and 2008-2009 academic years. "However, the parties soon discovered that they had left the negotiating table with two very different understandings of how a key component of their agreement would be implemented." An arbitrator was selected and the parties agreed that the issue to be decided by the arbitrator was whether “the Cumberland School Committee place[d] the aggrieved teachers at the correct salary level for the 2007-08 school year?” On appeal to the Supreme Court, the union argued that the arbitrator manifestly disregarded a contract provision when he found that there was no written agreement about how the new salary schedule would be implemented for the 2007-2008 year. Upon review, the Supreme Court concluded that the union did not demonstrate that the arbitrator manifestly disregarded the contract or that he was completely irrational in arriving at his decision and award.

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The dispute at the center of this case arose from a business relationship that "rapidly turned sour." Plaintiffs Charles and Marguerite Takian and Defendants Ralph and Lucia Rafaelian together purchased property in South Kingstown that included a motel, restaurant and trailer park. The couples formed a business to manage the property and Plaintiffs agreed to run the businesses. In 2002, the relationship between the parties deteriorated when Defendants alleged Plaintiffs were mismanaging the businesses. Defendants decided to sell their interest to Plaintiffs' son Randolph. As part of the sale, Defendants signed a release absolving Plaintiffs from "any and all claims arising out of the ownership of the property and operation of the business." After the sale, Defendants continued to feel "unsettled" about how the business had been operated. They investigated further and alleged to have discovered facts that suggested far more serious misdeeds in management. Plaintiffs filed an action for declaratory relief, in which they sought a ruling that the release that had been executed by Defendants contemporaneous with the sale barred any further claims. Defendants counterclaimed, both on behalf of themselves and derivatively on behalf of the corporation, alleging embezzlement, misrepresentation, misappropriation, and loss of corporate opportunity. A justice of the Superior Court granted summary judgment in favor of Plaintiffs, after he found that the release was both valid and effective against both defendants and the corporation. Defendants appealed. Upon review, the Supreme Court affirmed in part, and reversed in part. The Court found triable issues of fact that were inappropriate for resolution by summary judgment. The case was remanded for further proceedings with respect to those remaining issues.

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The questions before the Supreme Court in this case stemmed from damages sustained because of food contaminated by E. coli pathogens at two Sizzler Steak House restaurants. The plaintiffs in the underlying actions settled years ago, and the claims before the Court related to the apportionment of liability and costs among those who were defendants in the underlying actions. The defendants included Sizzler and Excel corporation, which processed and distributed the contaminated meat that was source of the E. coli pathogens. Among the plaintiffs was the estate of Brianna Kreifall, who died from the contaminated food. The court of appeals affirmed in part and reversed in part the circuit court. The Supreme Court affirmed on all issues, holding, inter alia, that (1) Sizzler was entitled to recover consequential damages for Excel's breach of implied warranties in the parties' meat supply contract; (2) Sizzler was entitled to indemnity from Excel for the entirety of Sizzler's advance partial payment to the Kriefall family; and (3) notwithstanding the jury's determination that Sizzler was zero percent responsible for the E. coli contaminated food, Sizzler may not recover attorney fees from Excel because the exception to the American Rule did not apply here.

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Petitioner Jones & Trevor Marketing appealed the dismissal of its suit against the owners of Financial Development Services, Jonathan Lowry and Nathan Kinsella, alleging various contract and tort claims based on an alter ego theory of liability. The district court held that Petitioner had not demonstrated sufficient facts to support its alter ego theory and therefore granted summary judgment against Petitioner on its tort and contract claims that rested on its alter ego theory. The court of appeals affirmed. The Supreme Court affirmed, holding that Petitioner failed to provide affirmative evidence establishing a genuine material dispute on its alter ego theory.

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This dispute centered around two roads owned by the Maceys, their company Family Link, and the remaining defendants (Defendants). Petitioner Nadine Gillmor previously brought suit against the Maceys seeking to interpret and enforce the terms of a settlement agreement purporting to give the Gillmors a limited private easement over one road and limited access over the other road. The court of appeals held that Gillmor had a limited private easement over the roads but that the easement would not pass on to her children from a prior marriage. Gillmor later brought two claims for access over the roads, asserting that the roads were subject to condemnation for a public access easement and that the roads had been continuously used as public thoroughfares for a period of ten years and were thus dedicated to public use as a "highway by use" under Utah Code 72-5-104. The district court dismissed the complaint based on res judicata and imposed sanctions on Gillmor's attorney for filing a claim without a basis in law. The Supreme Court (1) held that Gillmor's claims were not barred by res judiciata; and (2) vacated the imposition of sanctions. Remanded for adjudication of Gillmor's suit on the merits.

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At issue in this appeal was whether to judicially invalidate an insurance contract requirement that the insured file her lawsuit for underinsured motorist coverage (UIM) within two years of her auto accident. Plaintiff argued the deadline was unenforceable because, although she was still experiencing pain two years after the accident, only later did she discover the full extent of her injuries and realize her claim exceeded the other driver's liability limits. Plaintiff filed this UIM action against her insurer (Defendant) nearly six years after the accident. The district court granted Defendant's motion for summary judgment enforcing the contractual deadline as reasonable. The court of appeals reversed, holding the two-year limitation period was unreasonable under the circumstances. The Supreme Court vacated the court of appeals and affirmed the district court, holding that the two-year UIM insurance policy deadline was enforceable as a matter of law because it matched the two-year statute of limitations in Iowa Code 614.1(2) for personal injury actions.

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Plaintiff corporation filed an action against Defendant, a resident of Nebraska, for damages related to the termination of an apartment lease in Iowa where Defendant formerly resided. Plaintiff attempted to serve notice under Iowa's long-arm statute by certified mail at a forwarding address provided by Defendant upon the termination of his tenancy in the apartment. The notice, however, was returned by postal authorities. Plaintiff took no further action to achieve service, and the district court entered a default judgment against Defendant. Based on the default judgment, Plaintiff sought to garnish Defendant's wages at his Nebraska employer. Defendant sought to quash the garnishment on the ground that Plaintiff failed to comply with the requirements of Iowa Code 617.3 in connection with the underlying action. The district court denied Defendant relief. The Supreme Court reversed, holding that the underlying default judgment that gave rise to the garnishment in this case was void for lack of personal jurisdiction over Defendant as provided in section 617.3. Remanded with instructions to grant the motion to quash.