Justia Contracts Opinion Summaries

Michael O’Connor signed up for a loyalty program when he bought a pair of shoes and socks from Road Runner Sports, Inc. and Road Runner Sports Retail, Inc. (collectively, “Road Runner”). He alleged Road Runner did not tell him the loyalty program was an automatic renewal subscription and that his credit card would be charged an annual subscription fee. After discovering he had been charged for four years of subscription fees, he joined as the named plaintiff in a class action lawsuit alleging Road Runner had violated California’s Automatic Renewal Law and consumer protection statutes. Road Runner asserted O’Connor was bound by an arbitration provision it added to the online terms and conditions of the loyalty program, some three years after he enrolled. Although Road Runner conceded O’Connor did not have actual or constructive notice of the arbitration provision, it contended O’Connor created an implied-in-fact agreement to arbitrate when he obtained imputed knowledge of the arbitration provision through his counsel in the course of litigation and failed to cancel his membership. The Court of Appeal disagreed this was sufficient under California law to prove consent to or acceptance of an agreement to arbitrate. Accordingly, the Court affirmed the trial court’s order denying Road Runner’s motion to compel arbitration. View "Costa v. Road Runner Sports" on Justia Law

Rock Hemp contracted with CBDINC to purchase 6,000 hemp seeds. CBDINC is a fictitious business name used by Dunn, Davies, and Kolodny (Appellees). The contract contains an arbitration clause requiring “[a]ny dispute arising out of this Agreement” be resolved through “binding arbitration” in Denver, Colorado. Disappointed with CBDINC’s hemp seeds, Rock sued the Appellees individually, not CBDINC, in Wisconsin state court. The Appellees removed the case to federal court and moved to dismiss the case for failure to comply with the arbitration clause. Rock sought remand under 28 U.S.C. 1447.The Seventh Circuit affirmed the judgment in favor of the Appellees. Based on the date when Rock “specifically disclose[d] the amount of monetary damages sought,” the district court correctly found that removal was timely. The Appellees did not fully litigate the merits of the case in state court. The allegations in the complaint make clear that CBDINC was not a distinct legal entity from the Appellees, and Rock does not allege it was confused or deceived by the use of the d/b/a; the district court correctly concluded that the contract is valid and Appellees have standing to enforce it. View "Rock Hemp Corp. v. Dunn" on Justia Law

The Supreme Court held that the district court erred in denying Appellant's motion to compel arbitration and refusing to submit the arbitrability determination under the circumstances of this case to an arbitrator.Plaintiffs sued Airbnb, Inc. for wrongful death and personal injury alleging that Airbnb's services had been used by a party's host to rent the house where a shooting occurred, resulting in a fatality. Airbnb moved to compel arbitration, arguing that Plaintiffs had agreed to Airbnb's Terms of Service during the registration process for their accounts. The district court denied the motion to compel. The Supreme Court reversed, holding that because the Federal Arbitrability Administration governed the enforcement of arbitration agreement at issue, and because the agreement delegated the arbitrability question to an arbitrator, the district court erred in deciding the arbitrability question. View "Airbnb, Inc. v. Rice" on Justia Law

The Supreme Court reversed the order of the district court denying Appellant's motion to compel arbitration, holding that where an arbitration agreement delegates the threshold question of arbitrability to the arbitrator, the district court must refer to the case to arbitration, even if the court concludes that the dispute is not subject to the arbitration agreement.Respondents filed a personal injury lawsuit against Uber after their Uber driver rear-ended another Uber driver. Uber moved to compel arbitration on the grounds that Respondents had agreed to arbitrate their claims. The district court denied the motion, concluding that the arbitration agreement did not plainly provide that the parties agreed to submit this particular dispute to arbitration. The Supreme Court reversed, holding that where the arbitration agreement's delegation clause expressly requires the arbitrator to determine threshold issues of arbitrability, the district court erred by denying Uber's motion to compel on the ground that the claims were not subject to the arbitration agreement. View "Uber Technologies, Inc. v. Royz" on Justia Law

Defendant Jeffrey Mayhew and Plaintiffs David Starr and Thomas Hunt formed a limited liability company to operate a shopping center. They agreed Mayhew would manage the company and Starr and Hunt would provide startup capital. In exchange, Mayhew was entitled to 50 percent of the company’s profits and Starr and Hunt were entitled to the remaining 50 percent. After the shopping center’s business declined in 2008, Mayhew asked Starr and Hunt for additional capital. They agreed to do so only if Mayhew also contributed capital. Mayhew reported a $100,000 contribution, which caused Starr and Hunt to contribute roughly the same amount. The shopping center was later sold for a substantial profit. Mayhew claimed he was entitled to about 56.3 percent ownership interest in the company based on his additional capital contribution. Starr and Hunt disagreed and submitted the dispute to arbitration along with several other claims for damages. The arbitrator ruled in favor of Starr and Hunt, finding Mayhew only held a 50 percent interest in the company. A superior court later confirmed the award over Mayhew’s petition to vacate and entered judgment against him. On appeal, Mayhew claimed the trial court erred by failing to vacate the award, contending the arbitrator lacked authority to clarify the award, that the award was procured by undue means, and that the arbitrator’s award exceeded her powers. After its review, the Court of Appeal disagreed. Since Mayhew failed to identify any basis for vacating the award, the Court affirmed the judgment. View "Starr v. Mayhew" on Justia Law

The Supreme Court reversed the decision of the district court finding that Plaintiff did not waive its right to arbitration by its litigation-related conduct, holding that reversal was required in light of Morgan v. Sundance, Inc., __ U.S. __ (2022).Plaintiff sued Defendant for breach of contract. Defendant moved to dismiss the complaint with prejudice, arguing that Plaintiff waived its breach of contract claim under the parties' agreement by filing suit on the claim rather than commencing it in arbitration. Plaintiff subsequently filed a demand for arbitration and a motion to stay the case for arbitration. The district court granted Plaintiff's motion to stay the case, concluding that Defendant suffered no prejudice because of Plaintiff's litigation-related conduct. The Supreme Court reversed, holding that prejudice is not required to prove a party waived its right to stay a court case pending arbitration under section 3 of the Federal Arbitration Act following the United States Supreme Court's decision in Morgan. View "Kingery Construction Co. v. 6135 O Street Car Wash, LLC" on Justia Law

Hudson Valley Federal Credit Union (“HVCU”) appealed from the district court’s ruling denying HVCU’s motion to compel arbitration of Plaintiff’s putative class action claims for breach of contract, breach of the covenant of good faith and fair dealing, and claims under New York law and the Federal Electronic Fund Transfer Act.   The Second Circuit vacated and remanded the district court’s ruling, holding that the record was insufficiently developed for the district court to deny the motion to compel arbitration. The court concluded that the record is insufficiently developed on the issue of whether the parties entered into an agreement to arbitrate and, as a consequence, the court wrote it cannot determine the matter of arbitrability “as a matter of law.” Therefore, the court remanded for the district court to consider further evidence or, if necessary, hold a trial.   The court further explained that it was an error for the district court to engage in the inquiry notice analysis based on the copy of the Internet Banking Agreement, which does not depict the content and design of the webpage as seen by users signing up for online banking. The court wrote that on remand, the district court should consider the design and content of the Internet Banking Agreement as it was presented to users in determining whether Plaintiff assented to its terms. And the district court should assess whether the Account Agreements are clearly identified and available to the users based on the court’s precedents. View "Zachman v. Hudson Valley Federal Credit Union" on Justia Law

Xylem, which sells large-capacity water pumps, requested that Field develop hardware to interface with the pumps and computer software for monitoring and controlling the equipment. A 2013 “NonDisclosure Agreement” contained an arbitration provision. Xylem purchased the units from Field via written Purchase Orders and purchased monthly subscriptions that permitted Xylem’s customers to use Field’s software via cellular networks to monitor and control their Xylem pumps. There was no written agreement governing Xylem’s software subscription purchases until the 2017 “Software Subscription Service Agreement,” which contained an “integration clause” stating that “[t]his Agreement constitutes the entire agreement between the parties with respect to its subject matter and supersedes any and all prior or contemporaneous understandings or agreements.” The 2017 contract contained no arbitration provision, instead requiring any “action under or concerning” that contract to be litigated in New Jersey. Xylem began building its own hardware.Field sued, in New Jersey, for breach of the 2017 contract. In discovery, Xylem sent Field an interrogatory asking whether it intended to rely on the 2013 contract to support any of its claims. Field responded that Xylem breached the 2013 contract by its actions. Xylem then filed an arbitration demand. The district court held that the 2017 agreement superseded the earlier contract, eliminating any duty to arbitrate. The Third Circuit vacated in part. The district court was authorized to determine whether the second agreement superseded the first but the first agreement was not superseded. View "Field Intelligence Inc v. Xylem Dewatering Solutions Inc" on Justia Law

OneMain, a non-bank finance company, loaned Zirpoli $6,200.08, to be repaid at a rate of 26.91% (total $11,364.35). The loan was issued under the Consumer Discount Company Act (CDCA), a consumer protection statute, which creates an exception to Pennsylvania’s usury law. The loan is governed by a disclosure statement, a security agreement, and an arbitration agreement. Later, OneMain sold delinquent accounts to Midland, including Zirpoli’s loan. Midland sued Zirpoli but later dismissed the suit and undertook collection efforts.Zirpoli filed a class action, alleging that Midland’s collection activities constituted an unlawful attempt to collect the loan because Midland does not have a CDCA license and never obtained nor requested approval from the Department of Banking. Midland was, therefore, not lawfully permitted to purchase the loan. Midland moved to compel arbitration. The court denied the motion, focusing on the validity of the assignment from OneMain and Midland. The Third Circuit vacated. The ultimate illegality of a contract does not automatically negate the parties’ agreement that an arbitrator should resolve disputes arising from the contract. The parties to the loan clearly agreed to arbitrate the issue of arbitrability. The arbitration agreement provides that an arbitrator shall resolve the arbitrability of defenses to enforcement, including alleged violations of state usury laws. View "Zirpoli v. Midland Funding LLC" on Justia Law

In an action brought by the State of Hawaii challenging the U.S. Department of the Army’s changes to the operation of its dining facilities at Schofield Barracks and Wheeler Army Airfield in Honolulu, Hawaii, the Ninth Circuit reversed the district court’s conclusion that the Randolph-Shepard Act (“RSA”) did not apply to Dining Facility Attendant (“DFA”) contracts, and affirmed the district court’s conclusion that the RSA advance review provision applied to the reclassification of a Schofield Barracks contract.   The panel held that the district court applied an incorrect standard of review to the RSA arbitration panel’s construction of 20 U.S.C. Section 107(a) when it deferred heavily to the arbitration panel’s interpretation. Because the RSA did not delegate interpretive authority to the arbitration panel, the panel reviewed de novo. The panel held that the term “operate” was ambiguous in Section 107(a).   The panel held further that the statutory structure of the RSA supported a broad interpretation in favor of increased opportunities for blind vendors, and the implementing regulations swept even more broadly and counseled strongly in favor of applying the RSA to DFA contracts. The panel affirmed the district court’s conclusion that the RSA advance review requirement applied to the Army’s reclassification of Schofield Barracks’ dining facilities. View "STATE OF HAWAII V. USEDU" on Justia Law