Justia Contracts Opinion Summaries

In 2008, Kinzel, then CEO of Cedar Fair, borrowed $8,000,000 from Merrill Lynch to finance his exercise of the company’s stock options and to pay estimated taxes that would be due immediately upon exercise. Kinzel pledged the shares that he would acquire as collateral and entered into an agreement that allowed Merrill Lynch, “in its sole discretion and without prior notice,” to “liquidate” the collateral upon any of twelve events, including “if the value of the . . . collateral is in the sole judgment of [Merrill Lynch] insufficient.” The market value of the company dropped from the exercise price of $23.19 per share in April 2008 to $6.99 per share in March 2009. Having set a $7.00-per-share “trigger” to liquidate, Merrill Lynch began selling Kinzel’s shares, without advance notice to Kinzel and without first making demand upon Kinzel for repayment. Kinzel appealed the district court’s denial of leave to file an amended complaint to reassert a breach-of-contract claim that had been dismissed, and final judgment in favor of Merrill Lynch on a breach-of-good-faith claim. The Sixth Circuit affirmed, finding that Kinzel could not state a claim for breach of contract and that Merrill Lynch exercised its discretion within the “contemplated range” of “judgment based upon sincerity, honesty, fair dealing and good faith.” View "Kinzel v. Bank of America" on Justia Law

Homeowners obtained loans from Bank for the construction of a new home and entered into an agreement with Contractor to complete the new home construction. When Homeowners defaulted on payments owed to Contractor and on both loans, the house was sold at foreclosure, and Homeowners filed for bankruptcy. Contractor filed a fourth amended complaint against Homeowners, who were later dismissed as parties, and Bank. Following a trial the court granted summary judgment for Bank on Contractor’s claims of fraud and civil conspiracy. The Supreme Court reversed. After remand, Contractor filed a fifth amended complaint, which differed from the fourth amended complaint in several respects. The district court determined that the election of remedies doctrine and judicial estoppel required a dismissal of Contractor’s claims. The Supreme Court reversed, holding (1) Contractor’s claims were consistently premised on the existence of a contract, and therefore, no election was required; and (2) Contractor’s claims were based on different facts and obligations, and therefore, both could be pursued. View "deNourie & Yost Homes, LLC v. Frost" on Justia Law

At issue in this case was whether, under Connecticut law, after a judgment debtor’s wages have been garnished, the remaining wages are exempt from execution, and whether the transfer of those wages to a third party constitutes a fraudulent transfer. Pursuant to two state court judgments, The Cadle Company was Terry Fletcher’s judgment creditor, Fletcher owing the company more than $3 million. Since at least 2005, Terry has transferred more than $300,000 of his residual wages to the bank account of his wife, Marguerite Fletcher. The Cadle Company sued the Fletchers in federal district court, alleging, inter alia, that the transfer violated the Connecticut Uniform Fraudulent Transfer Act (CUFTA). The district court granted the Fletchers’ motion for partial summary judgment, granted The Cadle Company’s motion for partial summary judgment, and ultimately rendered judgment for The Cadle Company in the amount of $401,426 on its CUFTA claim. The Fletchers appealed to the Second Circuit Court of Appeals. The Second Circuit subsequently certified a question to the Supreme Court, which the Court accepted. The Supreme Court answered that Terry’s residual wages would not have been exempt from execution if he had retained possession of them, and therefore, they were subject to execution after Terry transferred them to his wife’s account. View "Cadle Co. v. Fletcher" on Justia Law

Plaintiffs were affiliated commercial entities that sought to enforce the auction sale of a syndicated loan against Bank. When Bank accepted Plaintiffs’ bid and then refused to transfer the loan, Plaintiffs brought this action alleging breach of contract and breach of the implied covenant of good faith and fair dealing. In response, Defendant argued that it had no obligation to transfer the loan because the parties never executed a written sales agreement and Plaintiffs failed to submit a timely cash deposit. Supreme Court granted Plaintiffs’ motion for summary judgment on the breach of contract cause of action. The Appellate Division reversed. The Court of Appeals reversed, holding that Plaintiffs established their entitlement to summary judgment because the prerequisites of executing a written sales agreement and submitting a timely cash deposit were not conditions precedent to formation of the parties’ contract and did not render their agreement unenforceable. View "Stonehill Capital Mgt., LLC v. Bank of the West" on Justia Law

Developer intended to develop real property into single-family residential lots and secured financing through Bank. Insurer provided a surety bond to the Planning and Zoning Commission. Insurer executed three Bond Agreements as surety for Developer. Developer later defaulted in its loan. In lieu of foreclosure, Developer deed the property to Bank’s property management company. Bank transferred the property to another internal holding company. The Commission subsequently complied with Bank’s request for the Commission to call Developer’s bonds and place the proceeds in escrow for the purpose of reimbursing Bank for completion of the necessary infrastructure projects required by Developer’s approved plat. Developer filed a declaratory judgment action alleging that the bonds were not callable and that payment on the bonds would result in Bank receiving an unjust enrichment. The trial court granted summary judgment for Defendants. The Supreme Court affirmed, holding (1) Developer was liable under the bond; and (2) Developer’s claims of error during discovery were unavailing. View "Furlong Development Co. v. Georgetown-Scott County Planning & Zoning Commission" on Justia Law

In 2010, EFIH borrowed $4 billion at a 10% interest rate, issuing notes secured by its assets; the Indenture states that EFIH may redeem the notes for the principal amount plus a “make-whole premium” and accrued, unpaid interest. It contains an acceleration provision that makes “all outstanding Notes . . . due and payable immediately” if EFIH files for bankruptcy. Interest rates dropped. Refinancing outside of bankruptcy would have required EFIH to pay the make-whole premium. EFIH disclosed to the Securities and Exchange Commission a “proposal [whereby] . . . EFIH would file for bankruptcy and refinance the notes without paying any make-whole amount.” EFIH later filed Chapter 11 bankruptcy petitions, seeking leave to borrow funds to pay off the notes and to offer a settlement to note-holders who agreed to waive the make-whole. The Trustee sought a declaration that refinancing would trigger the make-whole premium and that it could rescind the acceleration without violating the automatic stay. The Bankruptcy Court granted EFIH’s motion to refinance. EFIH paid off the notes and refinanced at a much lower interest rate; the make-whole would have been approximately $431 million. The Bankruptcy Court and district court concluded that no make-whole premium was due and that the noteholders could not rescind acceleration. The Third Circuit reversed. The premium, meant to give the lenders the interest yield they expect, does not fall away because the full principal amount becomes due and the noteholders are barred from rescinding acceleration of debt. View "In re: Energy Future Holdings Corp." on Justia Law

Robert Perry was issued a Citibank MasterCard account in 1998. The terms and conditions of the Citibank Card Agreement governing Perry’s account included an arbitration agreement. In 2010, Citibank filed a debt collection action against Perry seek to recover the balance owed on Perry’s account. In 2015, Perry filed an answer to Citibank’s complaint and a class counterclaim alleging that Citibank had violated the West Virginia Consumer Credit and Protection Act. Thereafter, Citibank filed a motion asking the court to compel arbitration of the parties’ claims. The circuit court concluded that Citibank had implicitly waived its right to arbitration by filing suit in circuit court and waiting nearly five years before seeking to invoke its contractual right to arbitrate. Citibank appealed. The Supreme Court reversed, holding that Citibank did not waive its right to compel arbitration in this matter. Remanded. View "Citibank, N.A. v. Perry" on Justia Law

In 2005, Connor Libby and Elena Chapa (collectively, Defendants) signed credit card agreements with Federated Capital Corporation’s predecessor-in-interest, a Utah corporation with its principal place of business in Pennsylvania. The agreements contained a forum selection clause and choice of law provision that adopted Utah substantive and procedural law to govern any dispute under the contract. The agreements required Defendants to make monthly payments to the address specific on their billings statements, and each billing statement required Defendants to send their payments to an address in Philadelphia, Pennsylvania. Defendants defaulted in 2006. In 2012, Federated filed separate claims in separate proceedings against Defendants. In each proceeding, the district court granted summary judgment in favor of Defendants, ruling that Utah’s borrowing statute required the court to apply Pennsylvania’s four-year statute of limitations, thereby barring Federated’s claims. Federated appealed, arguing that the agreement’s forum selection clause precluded the application of Utah’s borrowing statute. The Supreme Court affirmed, holding that the borrowing statute applied to and barred Federated’s causes of action. View "Federated Capital Corp. v. Libby" on Justia Law

In Suffolk I, the Supreme Judicial Court held that Reading Co-Operative Bank (Bank) was allowed to require Suffolk Construction Company, Inc. (Suffolk) to perform fully Suffolk’s obligations pursuant to a collateral assignment of payments under a subcontract between Suffolk and Benchmark Mechanical Systems, Inc. (Benchmark) to secure a debt owed by Bankmark to the Bank. Suffolk subsequently commenced this action to recover the surplus that resulted when the Bank applied that collateral to satisfy Benchmark’s debt. Suffolk’s equitable claims for implied subrogation and implied indemnification were dismissed for failure to state a claim, and Suffolk’s common-law claims were dismissed as time-barred. The Supreme Judicial Court affirmed in part and reversed in part, holding (1) Suffolk’s common-law claims were time-barred; but (2) Suffolk stated viable equitable claims to prevent Benchmark’s potential windfall and unjust enrichment for which relief can be granted. View "Suffolk Constr. Co., Inc. v. Benchmark Mechanical Sys., Inc." on Justia Law

A mandatory arbitration clause is contained in each deposit agreement for customers of appellee SunTrust Bank. The clause permits an individual depositor to reject the agreement’s mandatory arbitration clause by giving written notice by a certain deadline. SunTrust claimed it drafted the arbitration clause in such a way that only an individual depositor may exercise this right to reject arbitration on his or her own behalf, thereby permitting that individual to file only an individual lawsuit against the bank. But SunTrust asserted that even if, as it has been determined here, the filing of a lawsuit prior to the expiration of the rejection of arbitration deadline operated to give notice of the individual plaintiff’s rejection of arbitration, the complaint could not be brought as a class action because the filing of a class action could not serve to reject the arbitration clause on behalf of class members who have not individually given notice. Jeff Bickerstaff, Jr., who was a SunTrust Bank depositor, filed a complaint against SunTrust on behalf of himself and all others similarly situated alleging the bank’s overdraft fee constitutes the charging of usurious interest. At the time Bickerstaff opened his account (thereby agreeing to the terms of SunTrust’s deposit agreement), that agreement included a mandatory arbitration provision. In response to the ruling of a federal court in an unrelated action finding the arbitration clause in SunTrust’s deposit agreement was unconscionable at Georgia law, and after Bickerstaff’s complaint had been filed, SunTrust amended the arbitration clause to permit a window of time in which a depositor could reject arbitration by sending SunTrust written notification that complied with certain requirements. SunTrust had not notified Bickerstaff or its other customers of this change in the arbitration clause of the deposit agreement at the time Bickerstaff filed his complaint, but the complaint, as well as the first amendment to the complaint, was filed prior to the amendment’s deadline for giving SunTrust written notice of an election to reject arbitration. It was only after Bickerstaff’s complaint was filed that SunTrust notified Bickerstaff and its other existing depositors, by language printed in monthly account statements distributed on August 24, 2010, that an updated version of the deposit agreement had been adopted, that a copy of the new agreement could be obtained at any branch office or on-line, and that all future transactions would be governed by the updated agreement. SunTrust appealed the order denying its motion to compel Bickerstaff to arbitrate his claim, and the Court of Appeals affirmed the trial court, finding that the information contained in the complaint filed by Bickerstaff’s attorney substantially satisfied the notice required to reject arbitration. Bickerstaff appealed the order denying his motion for class certification, and in the same opinion the Court of Appeals affirmed that decision, holding in essence, that the contractual language in this case requiring individual notification of the decision to reject arbitration did not permit Bickerstaff to reject the deposit agreement’s arbitration clause on behalf of other putative class members by virtue of the filing of his class action complaint. The Georgia Supreme Court reversed that decision, holding that the terms of the arbitration rejection provision of SunTrust’s deposit agreement did not prevent Bickerstaff’s class action complaint from tolling the contractual limitation for rejecting that provision on behalf of all putative class members until such time as the class may be certified and each member makes the election to opt out or remain in the class. Accordingly, the numerosity requirement of OCGA 9-11-23 (a) (1) for pursuing a class complaint was not defeated on this ground. View "Bickerstaff v. SunTrust Bank" on Justia Law