Justia Contracts Opinion Summaries

Following an automobile accident in which Tracy Mitchell was injured when the vehicle in which she was a passenger, State Farm Mutual Automobile Insurance Company, Mitchell's insurer, paid Mitchell's medical expenses, among other coverage payments, and then sought, through subrogation, reimbursement from the driver Amy Kirk's insurer, Cotton States Mutual Insurance Company. Mitchell filed a personal-injury action against Kirk, State Farm, and fictitiously named defendants, alleging as to State Farm, among other things, that State Farm's right to recover from any damages awarded its payment of Mitchell's medical expenses was subject to a reduction, pursuant to the common-fund doctrine, for attorney fees incurred by Mitchell in pursuing the personal-injury action. The circuit court granted State Farm's summary-judgment motion, holding that the common-fund doctrine did not obligate State Farm to pay a pro rata share of Mitchell's attorney fees. Mitchell appealed the circuit court's decision to the Court of Civil Appeals. The Court of Civil Appeals reversed the circuit court's summary judgment, concluding that a common fund was created requiring State Farm to contribute to Mitchell's attorney fees; that the common-fund doctrine had not been contractually abrogated; and that the common-fund doctrine was not negated by State Farm's "active participation" in pursuing subrogation recovery. The Supreme Court granted certiorari review to determine, as a matter of first impression, the narrow question whether, under the common-fund doctrine, the subrogated insurance carrier was responsible for a pro rata share of the injured insured's attorney fees incurred in the process of obtaining an award against which the carrier has asserted a right of reimbursement. The Court affirmed the Court of Civil Appeals' judgment. View "Mitchell v. State Farm Mutual Automobile Insurance Co." on Justia Law

Morgan Keegan & Company, Inc. and Regions Bank (hereinafter referred to collectively as "Regions") appealed an order of the Baldwin Circuit Court which granted in part and denied in part their motions to compel arbitration in an action filed against them by Baldwin County Sewer Service, LLC ("BCSS"). In 2001 BCSS began discussing with AmSouth Bank ("AmSouth"), the predecessor-in-interest to Regions Bank, options to finance its existing debt. AmSouth recommended that BCSS finance its debt through variable-rate demand notes ("VRDNs").1 In its complaint, BCSS alleged that in late 2008 it received a notice of a substantial increase in the variable interest rates on its 2002, 2003, 2005, and 2007 VRDNs, which constituted BCSS's first notice that the interest-rate-swap agreements recommended by Regions did not fix the interest rate on the VRDNs but, instead, exposed BCSS to "an entirely new increased level of market risk in the highly complex derivative market." BCSS sued Regions Bank and Morgan Keegan asserting that Regions falsely represented to BCSS that swap agreements fixed BCSS's interest rates on all the BCSS debt that had been financed through the VRDNs. Following a hearing on the motions to compel arbitration, the trial court entered an order in which it granted the motions to compel arbitration as to BCSS's claims concerning the credit agreements but denied the motions to compel arbitration as to BCSS's claims concerning the failure of the swap transactions to provide a fixed interest rate. The trial court reasoned that the "Jurisdiction" clause in a master agreement, in combination with its merger clause, "prevent[ed] any argument that the VRDN arbitration agreement applies to disputes concerning the swap agreements" and that those clauses demonstrated that it was "the parties' intention, as it relates to the interest-swap agreement and any transaction related to that agreement, that the parties would not arbitrate but instead [any dispute] would be resolved by proceedings in a court of competent jurisdiction." Upon review, the Supreme Court concluded that Regions presented evidence of the existence of a contract requiring arbitration of the disputes at issue. The Court reversed the order of the trial court denying the motions to compel arbitration of BCSS's claims concerning the master agreement and the swap agreement and remanded the case for further proceedings. View "Regions Bank v. Baldwin County Sewer Service, LLC " on Justia Law

The United States District Court for the Northern District of Alabama, Eastern Division certified two questions of first impression to the Alabama Supreme Court: whether a coverage exclusion clause in an automobile insurance policy applied to the use of the vehicle used for transporting people or delivering newspapers (as part of the insured's job) was enforceable. A secondary issue was whether that exclusion applied when an accident takes place after the delivery of the last paper, "but while the insured is driving back to his point of origin or some other location." Scott and Lori Touart Thomas were injured as the result of an automobile accident; Lori had been driving. The Thomases recovered a judgment in state court against defendant Kenneth Gooden, Jr., the driver of the other vehicle. The dispute involved whether the Thomases were entitled to recover from Nationwide under the provisions of a Nationwide automobile liability insurance policy naming Gooden as an insured. Upon review, the Supreme Court concluded that the answer to the first certified question is "yes:" a clause in an automobile liability-insurance policy excluding coverage for the "use of any motor vehicle to carry persons or property for a fee" could be enforced as to an insured if the finder of fact concludes that the insured delivers newspapers for a fee and that the insured was using the covered vehicle for that purpose at the time of the accident. With regard to the second question, the Court concluded that the answer to the second certified question is "no:" a clause in an automobile liability-insurance policy excluding coverage for the "use of any motor vehicle to carry persons or property for a fee" cannot be enforced as to an insured after the delivery of the "property," i.e., newspapers in this case, is complete. View "Nationwide Mutual Ins. Co. v. Thomas" on Justia Law

Limestone Creek Developers, LLC ("LCD"), sued Stuart Trapp and two companies in which Trapp had a controlling interest (Kyvest, Ltd., and Redesign, Inc.) after Trapp was unable or unwilling to close on a contract he had personally entered into agreeing to purchase all the lots in a new subdivision owned by LCD. The trial court entered a summary judgment in favor of the Trapp defendants, and LCD appealed. While expressing no opinion with regard to whether that contract violated state law, the Supreme Court nevertheless held that the contract in question was void because it violated section 1.2.3 of the MCSR. Accordingly, the trial court correctly entered a summary judgment in favor of the Trapp defendants on LCD's breach-of-contract claim, as well as LCD's other claims, which were dependent on that contract. The judgment of the trial court was affirmed. View "Limestone Creek Developers, LLC v. Stuart Trapp et al. " on Justia Law

Lexington Insurance Company and Chartis, Inc. appealed a circuit court order that appointed a third arbitrator to the arbitration panel established to settle a dispute between Lexington and Southern Energy Homes, Inc. ("SEH"). From January 1, 2002, through October 31, 2004, SEH purchased from Lexington three commercial general-liability ("CGL") policies. An endorsement to a CGL policy insuring SEH from January 1, 2002, through December 31, 2002, provided that SEH is responsible for a $100,000 self-insurance retention ("SIR") "per occurrence." Endorsements to two successive CGL policies that together provided coverage to SEH through October 31, 2004, provide that SEH is responsible for a $250,000 SIR per occurrence. The SIR applied both to costs of defense incurred by SEH and to amounts SEH pays in settlement or pursuant to a judgment. From January 1, 2002, through October 31, 2004, SEH was named as a defendant in 46 lawsuits alleging property damage and personal injury resulting from SEH's using a vinyl-on-gypsum product in the homes it manufactured. SEH gave notice of these lawsuits to Lexington, and that it had exhausted its SIR amounts in the litigation and was entitled to reimbursement from Lexington. More than 120 days passed without SEH receiving a decision from Lexington as to whether it agreed with SEH's claim for this amount. SEH made an arbitration demand pursuant to the arbitration clauses of the CGL policies, including the SIR endorsement to the 2002 policy. Upon review of the policies in question, the Supreme Court concluded that the circuit court erred in appointing the third arbitrator. The order was reversed and the case was remanded for further proceedings. View "Lexington Insurance Co. v. Southern Energy Homes, Inc. " on Justia Law

Regions Bank ("Regions"), as sole trustee of the J.F.B. Lowrey Trust ("the Lowrey Trust"), appealed a circuit court's order that denied Regions' motion to award it attorney fees and costs. Sam G. Lowrey, Jr., and Shelby Lowrey Jones, two of the current beneficiaries of the Lowrey Trust ("the beneficiaries") cross-appealed the trial court's judgment in favor of Regions on their breach-of-fiduciary-duty claim. The beneficiaries claimed that Regions failed to protect and preserve the assets of the Lowrey Trust, which consisted primarily of approximately 20,000 acres of timberland located in Monroe and Conecuh Counties and which have been the subject of much intra-family litigation. The trial court entered a detailed order in favor of Regions, rejecting the beneficiaries' claims of mismanagement of the trust assets and taxing costs against the beneficiaries. Regions filed a bill of costs and a supplemental bill of costs detailing all the expenses incurred in defending the claim, and attaching supporting documentation. The beneficiaries filed a motion to review taxation of costs and a motion to vacate the judgment. The trial court did not rule on the motions, and all post-trial motions were deemed denied by operation of law. Regions timely appealed, and the beneficiaries filed a cross-appeal. Upon review of the record of the five-day bench trial and the considerable documentary evidence, the Supreme Court held that there was substantial evidence to support the trial court's decision on the beneficiaries' breach-of-fiduciary-duty claim. Thus, the Court affirmed the trial court's judgment in favor of Regions on that claim. The Court reversed the trial court's ruling on Regions' motion for attorney fees, and remanded this case back to the trial court for a hearing on Regions' attorney-fee motion to consider the reasonableness of the attorney fee. View "Regions Bank v.Lowrey" on Justia Law

Highlands of Lay, LLC ("Highlands") appealed a default judgment entered in favor of Edward O. Murphree. Murphree sued Highlands and John J. Miller, who Murphree alleged was a member of Highlands and its authorized agent. Murphree alleged fraudulent concealment, fraudulent misrepresentation, negligent misrepresentation, promissory estoppel, and breach of contract, arising out of a real-estate transaction. After he amended his complaint, Murphree was not able to obtain service upon Highlands or Miller, and the trial court granted a motion to serve them by publication. Highlands and Miller answered, and Highlands filed a counterclaim alleging negligence. Murphree then served discovery requests on Highlands. Murphree later sent additional discovery requests to Highlands and Miller; Highlands and Miller did not respond. When Highlands and Miller continued to be unresponsive to the suit, Murphree moved for a default judgment. Upon review of the case, the Supreme Court found that some of the issues presented in the then-still pending claim against Miller were the same issues presented in this appeal by Highlands. Highlands argued that the trial court erred in not setting aside the default judgment against it because it had a meritorious defense to Murphree's claims based on Miller's statements or e-mail from Miller and the timing of statements or e-mail to Murphree. "Appellate review in piecemeal fashion is not favored." The Court concluded that the trial court exceeded its discretion in certifying the judgment entered against Highlands as final pursuant to Rule 54(b). Highlands' appeal was therefore dismissed. View "Highlands of Lay, LLC v. Murphree " on Justia Law

The United States Bankruptcy Appellate Panel of the Court of Appeals for the Ninth Circuit ("the BAP") certified a question to the Alabama Supreme Court: "In Alabama, is a 'default' judgment premised upon discovery sanctions or other post-answer conduct of the defendant sufficient to support the application of issue preclusion in a later proceeding?" Debtor-Defendant Anthony Malfatti was one of three principals of TA Financial Group ('TAF') purportedly designed to assist credit card holders in arbitration of disputes with the card issuers. The arbitration providers were selected by the card holders from a list provided by TAF. Among the arbitration providers was Arbitration Forum of America, Inc. ('AFOA'). AFOA was not conducting legitimate arbitrations; every arbitration resulted in an award in favor of the card holder, which was then reduced to judgment. Malfatti claims he was unaware that AFOA's practices and the judgments stemming therefrom were illegitimate. At some time after the banks involved learned of the judgments, they filed cross-complaints against the card holders to set aside the judgments as fraudulently obtained. In September 2005, the banks, including Bank of America, N.A. (USA) filed Amended Third Party Complaints against, among others, Malfatti and TAF, alleging tortious interference with contract, abuse of process, wantonness, and civil conspiracy, and sought an injunction against further arbitrations. The Banks moved for default judgments against Malfatti and TAF for failing to comply with discovery orders, repeated failures to appear for depositions, and failure to respond to written discovery. Malfatti and TAF filed a motion to set aside the defaults. The court found Malfatti and TAF to be jointly and severally liable for compensatory damages, awarded punitive damages against Malfatti, and found Malfatti to be liable for punitive damages awarded against TAF under the alter ego doctrine. Malfatti filed for Chapter 7 bankruptcy the Banks filed an adversary proceeding alleging the debt owed to them by Malfatti was nondischargeable. Upon review, the Alabama Supreme Court answered the certified question in the negative: "[f]or purposes of determining whether an issue is precluded by the doctrine of collateral estoppel, Alabama law makes no distinction between a simple default and a penalty default."

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.

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.