Justia Contracts Opinion Summaries

White-Spunner Construction, Inc., and Hartford Fire Insurance Company ("Hartford") appealed the grant of summary judgment and the award of attorney fees in favor of Construction Completion Company, LLC ("CCC"), in CCC's action alleging that White-Spunner failed to pay it for labor and materials it provided as a subcontractor to White-Spunner in the fall of 2008 in conjunction with White-Spunner's work as the general contractor on a public-works project at Auburn University CCC cross-appealed, arguing that the Mobile Circuit Court erred in dismissing its bad-faith and fraud claims against Hartford, which had issued payment bonds to White-Spunner for the project. Upon review, the Supreme Court reversed the grant of summary judgment based on the fact that CCC's claims against White-Spunner and Hartford stemmed from an illegal contract CCC entered into with an unlicensed contractor that provided that contractor's employees would complete the work CCC was contracted to perform. As a result of this reversal, the Court dismissed the cross-appeal as moot.

Monte Sano Research Corporation ("MSRC"), Steven L. Thornton, and Steven B. Teague appealed a preliminary injunction entered against them in an action brought by Kratos Defense & Security Solutions, Inc.; Digital Fusion, Inc. ("DFI"), and Digital Fusion Solutions, Inc. ("DFSI") alleging breach of the duty of loyalty, breach of contract, tortious interference with business and contractual relationships, and civil conspiracy. Additionally, Kratos sought injunctive relief. Thornton and Teague were employees of DFI, which also engaged in government subcontract work; they became employees of Kratos when Kratos Defense merged with DFI in 2008. In February 2009, Thornton and Teague met with Doyle McBride, a NASA consultant who had never been employed by Kratos, to discuss starting a new company to perform government contract work. Several months later, MSRC was incorporated, with McBride and Teague each owning 50 percent. Thornton had no legal interest in MSRC at its formation. McBride acquired office space, issued stock, filed tax returns, obtained business licenses, registered to engage in government contracting, attended meetings, and talked with prime contractors on MSRC's behalf. In June 2011, Thornton's supervisor at Kratos learned that several employees under Teague's supervision had resigned in a short period. Following an investigation, Kratos terminated Teague's employment on June 23, 2011; Thornton resigned four days later. Teague and Thornton then went to work for MSRC. Thornton subsequently purchased MSRC from McBride and became its CEO and president. Subsequently Kratos filed a complaint against MSRC, Thornton, and Teague alleging specifically that Thornton and Teague, while employed by Kratos, assisted in the creation of MSRC, solicited Kratos employees, wrongfully diverted business opportunities, and misappropriated confidential and proprietary information. Kratos also alleged that MSRC wrongfully diverted business opportunities and misappropriated confidential and proprietary information. Kratos applied for a temporary restraining order ("TRO") and for a preliminary injunction on June 29, 2011. On appeal, MSRC, Thornton, and Teague argued that the preliminary injunction should be dissolved. MSRC, Thornton, and Teague raised several issues on appeal; however, because the Supreme Court concluded that the trial court's order was overbroad and that it failed to comply with Rule 65, Ala. R. Civ. P., the Court did not reach any of their other issues.

David Bennett and Bennett & Bennett Construction, Inc. ("Bennett") appealed the trial court's denial of their motion to compel arbitration of the claims alleging fraud in the inducement and the tort of outrage brought against them by Barbara and Leotes Skinner. The Skinners entered into a construction-services contract with Bennett, pursuant to which Bennett was to renovate and remodel their residence located in Oxford. After disagreements developed between the parties, the Skinners sued Bennett, alleging claims of breach of contract; breach of warranty; fraud in the inducement; assault and battery; the tort of outrage; and negligence, wantonness and recklessness. Bennett moved to compel arbitration of all claims, arguing that, because each of the claims alleged by the Skinners arose from the construction-services contract or were related to the construction-services contract, the claims were subject to arbitration. Furthermore, Bennett argued that the tort-of-outrage claim arose out of a disagreement concerning the construction-services contract and that the Skinners should not be allowed to avoid arbitration because they cast their claim as a tort. The Skinners responded, arguing that their agreement to the arbitration clause in the contract was obtained fraudulently. The trial court denied Bennett's motion. Upon review, the Supreme Court concluded that the Skinners' tort-of-outrage claim arose out of a disagreement concerning the construction-services contract and thus was a proper claim for arbitration. The Court reversed the trial court's ruling and remanded the case for further proceedings.

Northstar Battery Company, LLC ("Northstar"), petitions this Court for a writ of mandamus directing the Cullman Circuit Court to vacate its order denying Northstar's motion to dismiss the action filed against it by Apel Steel Corporation ("Apel") and to enter an order dismissing the action for lack of in personam jurisdiction. The case stemmed from a contract in which Apel Steel was working as a subcontractor for a battery manufacturing plant in Springfield, Missouri. Northstar Battery, owner of the plant, contracted with Walton Construction to serve as general contractor. Apel had further subcontracted a portion of its work to JS Nationwide, who erected structural steel at the plant. Sparks from welding started a fire which resulted in the destruction of property/equipment, and caused heat and smoke damage in the affected area of the plant. The contract between Apel and Walton contained a provision by which Apel allegedly waived all rights against JS Nationwide. Counts against Northstar alleged negligence, unjust enrichment, breach of contract, misrepresentation and conspiracy. Northstar moved to dismiss citing lack of personal jurisdiction. Finding that Apel failed to carry its jurisdictional burden, the Supreme Court held that the trial court "clearly" erred in denying Northstar's motion to dismiss. Accordingly, the Court granted Northstar's petition and issued the writ.

Monte Sano Research Corporation (MSRC), Steven L. Thornton, and Steven B. Teague appealed a preliminary injunction entered against them in an action brought by Kratos Defense & Security Solutions, Inc., a California-based aerospace and defense contractor, Digital Fusion, Inc. (DFI), an Alabama-based holding company, and Digital Fusion Solutions, Inc. (DFSI), a Florida corporation and a subsidiary of DFI (referred to collectively as Kratos), alleging breach of the duty of loyalty, breach of contract, tortious interference with business and contractual relationships, and civil conspiracy. Additionally, Kratos sought injunctive relief. MSRC was formed in 2009 to procure government subcontract work at Redstone Arsenal in Huntsville. Thornton and Teague were employees of DFI, which also engaged in government subcontract work; they became employees of Kratos when Kratos Defense merged with DFI in 2008. Kratos terminated Teagues employment on June 23, 2011. Thornton resigned from Kratos four days later. A dispute arose between the parties which implicated the employment contracts for Thornton and Teague when they sought subsequent work. Upon review of this case, the Supreme Court found that because the provisions of Rule 65(d)(2) of the Alabama Rules of Civil Procedure were not complied with and because there was no evidence of an irreparable injury or the lack of an adequate remedy at law, the trial court erred in issuing the preliminary injunction. The Court reversed the trial courts order entering the preliminary injunction and remanded the case to the trial court with directions that it dissolve the injunction it issued September 10, 2011.

Fred and Nancy Eagerton appealed a summary judgment granted in favor of Vision Bank in the bank's action seeking to enforce the Eagertons' obligations under certain guaranty contracts. "Dotson 10s, LLC" was organized to operate a tennis club in Fairhope. Dotson 10s executed a note and security agreement with Vision Bank, and the bank obtained in exchange, unlimited personal guarantees from John and Elizabeth Dotson, and limited guarantees from the Eagertons. The Dotsons executed a second loan to which the Eagertons were not a party. The Dotsons defaulted on both loans, and the bank sued the Dotsons as the primary obligors, and the Eagertons as personal guarantors. Dotson 10s then filed for bankruptcy protection. Part of the reorganization plan provided in part that the two loans would be combined and paid in full. Dotson 10s subsequently defaulted on the bankruptcy plan. The properties were foreclosed and sold, with the proceeds applied to the consolidated loan. The circuit court then entered a partial summary judgment in favor of the bank against Dotson 10s, but denied the motion as to the Eagertons. The bank argued that the Eagertons were still responsible under their guaranty contracts for the deficiency remaining on the consolidated loan. The Eagertons argued that the creation of the consolidated loan without their knowledge or consent, operated to discharge them from any further obligations under their guaranty contracts. Upon review, the Supreme Court agreed, and reversed the circuit court's judgment in favor of the bank, and remanded the case for further proceedings.

These consolidated appeals arose from the same facts: in 1990, Richard L. Parker applied to American Family Life Assurance Company of Columbus (Aflac) for a cancer-indemnity insurance policy. Aflac issued Parker a policy. The term of the 1990 policy was month-to-month; the monthly premium was $28.50. Aflac received payments for the 1990 policy from August 25, 1990, to August 17, 1996. Parker applied for a new policy in May 1996 for when the 1990 policy was set to terminate. The 1996 policy took effect August 16, 1996, and used the same number as the 1990 policy. Parker renewed the policy once again in 2009, but the 2009 policy contained an arbitration clause. By a special waiver, the 2009 policy's language stated that Parker would give up his "current" policy and its benefits for the benefits in the new one. Parker paid according to the term of the 2009 policy. But in 2010, Parker sued Aflac asserting a claim of bad faith for Aflac's alleged failing to pay policy benefits owed under the 1990 policy. Aflac responded by filing a motion to compel arbitration according to the terms of the 2009 policy. The circuit court conducted a hearing on the motion and denied it. Upon review, the Supreme Court concluded that Aflac satisfied its burden of proving that an arbitration agreement existed that applied to Parker's claims against it. Because there was no issue as to whether the contract containing the arbitration agreement affected interstate commerce, the burden then shifted to Parker to offer evidence refuting the evidence offered by Aflac and Hunter; Parker offered no evidence to refute that evidence and presented "no persuasive argument" that Aflac failed to meet its burden. The Court reversed the circuit court's decision and remanded the case for further proceedings.

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 and Auto Owners entered into an "agency agreement" authorizing Blackmon to act as an agent for the sale of Auto Owners' insurance in Alabama (the 1995 agreement). A 2005 document entitled "Letter of Instructions" was alleged to be an independent document from the 1995 agreement. Auto Owners contended that the 2005 document was contemplated by and incorporated into the 1995 agreement. The 2005 document contained instructions governing the issuance of a variety of bonds by an agency of Auto Owners. In late 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 home state of Michigan. Blackmon also alleged that in the Michigan arbitration proceeding Auto Owners based its claims on the 2005 document and a 2009 agreement. Upon review of the matter, the Alabama Supreme Court concluded that the circuit court erred in denying Auto Owners' motion to compel arbitration. The Court therefore reversed that order and remanded the case for the circuit court to grant the motion to compel arbitration and either issue a stay of these proceedings pending arbitration or dismiss the case.

Husband and wife Emmett and Debra Jackson appealed the grant of summary judgment in favor of Wells Fargo Bank, N.A. in their action against the bank and trustee. The Jacksons challenged a foreclosure sale of their property. The Jacksons refinanced an existing home loan; in so doing, they gave a mortgage on the property which was subsequently assigned to Wells Fargo. Although the mortgage was, in turn, assigned to the trustee, the bank continued to function as the "servicer" of the loan. By 2007, the Jacksons were in arrears on their mortgage payments. While the Jacksons and the bank were engaged in negotiations for forbearance, the Jacksons did not make certain scheduled payments. During the negotiations, a debt-collection representative of the trustee sent the Jacksons a "NOTICE OF ACCELERATION OF PROMISSORY NOTE AND MORTGAGE." The house was put up for sale, and a foreclosure deed was issued to a third party. The Jacksons then sued the bank, the trustee, and the purchaser of the property alleging negligent or wanton foreclosure and breach of contract. The bank and trustee moved for summary judgment, contending that the Jacksons lacked any basis from which to contest the foreclosure sale. Upon review, the Supreme Court found that the Jacksons presented no basis on which to reverse the summary judgment as to their claim of negligent or wanton foreclosure, however, the Court agreed that the acceleration letter was fundamentally flawed. The Court reversed the grant of summary judgment on the breach of contract claim, and remanded the case for further proceedings.

Now defucnt Galt Industries, its former president, his wife, and a former employees sued Aegis Strategic Investment Corporation and its sole shareholder Mark Heisz, alleging Aegis failed to fulfill certain terms of an asset-purchase agreement. Following a jury trial, the trial court entered a judgment awarding Galt $824,000 in damages, and held Aegis jointly and severally liable for those damages. Aegis appealed. Finding that the evidence presented at trial did not support the trial court's decision, the Supreme Court reversed the decision and remanded the case for further proceedings.