Justia Contracts Opinion Summaries

At issue in this bankruptcy case was whether a defaulting subcontractor who has no contractual right to compensation is nonetheless entitled to an equitable recovery if the general contractor has benefited at the subcontractor’s expense.Insite, a bankrupt subcontractor, filed an adversary proceeding against Walsh, a general contractor, in bankruptcy court claiming that Walsh improperly withheld payments belonging to its bankruptcy estate. The bankruptcy court found the doctrine announced in Pearlman v. Reliance Insurance Co., 371 U.S. 132, 141-42 (1962), prevented Insite from gaining a property interest in the funds withheld by Walsh. The district court affirmed. The First Circuit vacated the judgment below and remanded, holding (1) the Pearlman doctrine did not address the primary issue in this case; and (2) while Insite was not due funds under its contract with Walsh, the bankruptcy and district courts must consider whether Walsh was benefited by Insite’s post-default performance in such a way that Insite had an equitable claim under Puerto Rico law. View "Insite Corp. Inc. v. Walsh Construction Co. Puerto Rico" on Justia Law

Charles Erwin appeals from an amended judgment entered in favor of Alerus Financial, N.A., for $5,265,653.09. Starting in 2012 Alerus made a series of loans totaling more than $15 million to Diverse Energy Systems, LLC. The loan agreement specified "Events of Default," including the failure to pay the indebtedness, the insolvency of the borrower or guarantor or the commencement of bankruptcy proceedings. Erwin was Diverse's chief executive officer, and he signed multiple personal guaranties, promising to be personally responsible for payment of up to $4 million of Diverse's debt owed to Alerus. In September 2015 Diverse filed for bankruptcy. In May 2016 Alerus sued Erwin for breach of contract and unjust enrichment, alleging Diverse was in default under the loan agreement and Erwin failed to make payment on the amount due under the guaranties. Alerus alleged Diverse's indebtedness exceeded $12 million and under the guaranties Erwin was liable for at least $4 million in principal and interest. On September 6, 2016, Erwin filed an answer to Alerus' complaint. Alerus moved for summary judgment, arguing Diverse defaulted on its loan obligations and Erwin breached the guaranty contracts by failing to pay the amounts due under the guaranties. Alerus also filed an affidavit in support of its motion from an Alerus employee, which it claimed showed the total outstanding principal and interest on the loans to Diverse. Erwin argued on appeal to the North Dakota Supreme Court the district court abused its discretion by failing to rule on his motion to amend his answer and entering judgment without allowing him to conduct discovery on Alerus' damage claims. Finding no reversible error, the Supreme Court affirmed the amended judgment. View "Alerus Financial, N.A. v. Erwin" on Justia Law

In 1995, Peoria signed a lease that allowed RTC to construct and operate a gas conversion project at the city’s landfill, providing that when the lease terminated, the city had an absolute right to retain, at no cost, the “structures” and “below‐grade installations and/or improvements” that RTC installed. Years later, RTC entered bankruptcy proceedings. Banco provided RTC with postpetition financing secured with liens and security interests in effectively all of RTC’s assets. RTC defaulted. Litigation ensued. The city notified RTC that it was terminating the lease and would retain the structures and installations. After RTC stopped operating the gas conversion project, Peoria modified the system to comply with environmental regulations for methane and other landfill gasses and continued to use the property. Banco sued, alleging unjust enrichment and arguing that it had a better claim to the property because its loan was secured by a lien on all of RTC’s assets and the bankruptcy court had given its loan “super-priority” status. The Seventh Circuit affirmed summary judgment in favor of the city. No matter the priority of its claim to RTC’s assets, Banco has no claim to Peoria’s assets. By the terms of the lease between RTC and the city, the disputed structures and installations are city property. The lease gave RTC no post‐termination property interest in that property. View "Banco Panamericano, Incorporat v. City of Peoria, Illinois" on Justia Law

The M/V Deep Blue purchased fuel from a supplier, the supplier purchased the fuel from an affiliate, and the affiliate subcontracted with Radcliff. Radcliff subsequently asserted a maritime lien on the Deep Blue in a bid to recover directly from the ship, giving rise to this litigation. The Fifth Circuit affirmed the district court's determination that Radcliff did not have a lien on the Deep Blue. Instead, a lien had arisen in favor of the global fuel supplier, and was duly assigned to ING Bank, an intervenor in the suit. View "Barcliff, LLC v. M/V Deep Blue" on Justia Law

The Supreme Court reversed the judgment of the trial court in favor of Defendant on Plaintiff’s complaint and Defendant’s counterclaim for damages and declaratory judgment. This case stemmed from a purchase agreement entered into by the parties in which Plaintiff was to provide various equipment and services to Defendant for a telecommunications switch room. The Supreme Court held (1) the trial court incorrectly concluded that Plaintiff breached the purchase agreement by filing a petition for bankruptcy protection under chapter 11 of the United States Bankruptcy Code; and (2) the trial court erred in determining that Defendant was within its rights to terminate the purchase agreement upon Plaintiff’s initiation of bankruptcy proceedings. View "CCT Communications, Inc. v. Zone Telecom, Inc." on Justia Law

Defendant Anice Plikaytis appealed an order awarding her attorneys' fees in a breach of contract action brought by plaintiff Debra Roth. In the published portion of its opinion, the Court of Appeal agreed with Plikaytis's contention that the trial court erred when it declined to consider previously filed documents she incorporated by reference as part of her motion. In the unpublished portions of the opinion, the Court discussed Plikaytis's arguments that: (1) the court failed to apply the lodestar method; (2) erroneously denied fees for equitable and cross-claims and for obtaining relief from bankruptcy stays; and (3) substantially reduced her award without explanation. The Court of Appeal concluded the trial court erred by denying fees for obtaining bankruptcy stay relief that related to the breach claim and failing to provide an adequate justification for significantly reducing the number of hours allowed. Accordingly, the trial court was affirmed in part, reversed in part, and the matter remanded with directions. View "Roth v. Plikaytis" on Justia Law

From 1977-1984 Banco reinsured 2% of the Insurer’s business. The Insurer stopped writing policies in 1985, went into receivership in 1986, and began liquidating in 1987. Through 1993 the liquidator complied with contractual provisions requiring balances to be calculated quarterly and statements sent. If the Insurer owed reinsurers net balances for the previous quarter, it paid them; if the reinsurers owed the Insurer, bills were sent. In 1993, the liquidator stopped sending checks or bills without explanation. In 2008, the liquidator notified Banco that Banco was owed $225,000 as the net on 1993-1999 business. For periods before 1993, the Insurer was owed $2.5 million. In 2010, Banco protested the bill as untimely. Pine bought the Insurer’s receivables and, in 2012, sued Banco. Litigation about procedural issues, arising from the fact that Banco is wholly owned by Uruguay, consumed several years. The Seventh Circuit affirmed summary judgment, holding that Pine’s claim is untimely. Each contract required scheduled netting of claims and payment of the balance. Claims against Banco accrued no later than 1993. The contracts specify application of Illinois law, which allowed 10 years (until 2003) to sue on contracts. A statute concerning insurance liquidation, 215 ILCS 5/206, does not permit a liquidator to wait until the end to net the firm’s debits and credits. View "Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado" on Justia Law

ConocoPhillips Co. and Alma Energy Corp. exchanged oil and gas interests under an exchange agreement in which each indemnified the other for any environmental claims related to the properties received. Alma later filed for protection under Chapter 11 of the Bankruptcy Code. Thereafter, Noble Energy Inc. agreed to by the properties Alma had received from Conoco under the exchange agreement. After the bankruptcy proceeding concluded, an environmental contamination suit was filed against Conoco, and Noble refused to indemnify Conoco under the exchange agreement. Conoco filed suit against Noble alleging breach of the exchange agreement and seeking to recover the $63 million it paid to settle the suit. The trial court granted summary judgment for Noble. The court of appeals reversed and entered summary judgment for Conoco, concluding that the exchange agreement was an executory contract that was assumed by Alma and assigned to Noble in the bankruptcy proceeding. The Supreme Court affirmed, holding that under the terms of the bankruptcy court order confirming the plan of reorganization and the agreement for sale of Alma’s assets, Noble was assigned an undisclosed contractual indemnity obligation of Alma. View "Noble Energy, Inc. v. Conocophillips Co." on Justia Law

Reid founded Capitol, which owned commmunity banks, and served as its chairman and CEO. His daughter and her husband served as president and general counsel. Capitol accepted Federal Reserve oversight in 2009. In 2012, Capitol sought Chapter 11 bankruptcy reorganization and became a “debtor in possession.” In 2013, Capitol decided to liquidate and submitted proposals that released its executives from liability. The creditors’ committee objected and unsuccessfully sought derivative standing to sue the Reids for breach of their fiduciary duties. The Reids and the creditors continued negotiation. In 2014, they agreed to a liquidation plan that required Capitol to assign its legal claims to a Liquidating Trust; the Reids would have no liability for any conduct after the bankruptcy filing and their pre-petition liability was limited to insurance recovery. Capitol had a management liability insurance policy, purchased about a year before it filed the bankruptcy petition. The liquidation plan required the Reids to sue the insurer if it denied coverage. The policy excluded from coverage “any claim made against an Insured . . . by, on behalf of, or in the name or right of, the Company or any Insured,” except for derivative suits by independent shareholders and employment claims (insured-versus-insured exclusion). The Liquidation Trustee sued the Reids for $18.8 million and notified the insurer. The Sixth Circuit affirmed a declaratory judgment that the insurer had no obligation with respect to the lawsuit, which fell within the insured-versus-insured exclusion. View "Indian Harbor Insurance Co. v. Zucker" on Justia Law

Plaintiff sued Debtor after Debtor defaulted on a loan. Plaintiff secured a default judgment in the amount of $137,030.78. Without making payment on the judgment, Debtor later filed for Chapter 7 bankruptcy protection. Plaintiff commenced an adversary proceeding in bankruptcy court seeking an order declaring the debt non-dischargeable. Specifically, Plaintiff claimed that the debt was within the purview of 11 U.S.C. 523(a)(2)(B), which exempts from discharge certain debts. Debtor answered the complaint and then moved to dismiss for failure to state a claim. Plaintiff then moved to amend her complaint to include an alternative claim that the debt was non-dischargeable under 11 U.S.C. 523(a)(2)(A). The bankruptcy court granted Debtor’s motion to dismiss and denied Plaintiff’s motion to amend. The Bankruptcy Appellate Panel for the First Circuit affirmed the bankruptcy court’s dismissal of Plaintiff’s complaint and refusal to allow Plaintiff to add a section 523(a)(2)(A) claim to her complaint. The First Circuit affirmed, holding (1) the section 523(a)(2)(B) claim was properly dismissed; and (2) an adequate basis existed for the bankruptcy court’s denial of Plaintiff’s motion to amend. View "Privitera v. Curran" on Justia Law