Justia Contracts Opinion Summaries

A company developed a specialized vehicle-mounted stairway, with design work primarily performed by the founder’s son, who was promised equity in the business but never received it due to the majority owner’s repeated refusals. The son, with his father’s assistance, eventually obtained a patent for the design, which he used as leverage to seek compensation. Negotiations between the parties failed, leading to the father’s removal as company president and the company filing suit against both the father and son. The company alleged breach of fiduciary duty, misappropriation of trade secrets, business conspiracy, unjust enrichment, fraud, and breach of contract, while the son counterclaimed for patent infringement.The United States District Court for the Eastern District of Virginia granted summary judgment to the father and son on all claims except a breach of contract claim against the father and the son’s patent counterclaim. The court found most claims time-barred or unsupported by evidence, and later, the company voluntarily dismissed its remaining claim. The son’s patent was invalidated by a jury. The district court also awarded attorneys’ fees and costs to the father as the prevailing party under the company’s operating agreement.The United States Court of Appeals for the Fourth Circuit reviewed the case de novo and affirmed the district court’s rulings. The appellate court held that the company’s claims were either time-barred under the applicable statutes of limitations or failed on the merits, as there was no evidence the son benefited from the patent or that he had signed a non-disclosure agreement. The court also affirmed the award of attorneys’ fees and costs to the father, finding no error in the district court’s application of Delaware law or its determination of the prevailing party. View "Mission Integrated Technologies, LLC v. Clemente" on Justia Law

A commercial real estate broker and consultant partnered with three brothers who owned an architecture and construction company to develop and lease a commercial property. They planned to form a limited liability company (LLC) as equal members, contributing professional services and cash, but did not formalize their agreement in writing. After a dispute arose over a broker commission, the brothers executed a backdated operating agreement that excluded the broker from LLC membership. The broker alleged he was unfairly cut out of the deal and sued for breach of contract and unjust enrichment.The Marshall Circuit Court granted summary judgment to the brothers on the contract claim, finding that Indiana law required written confirmation for LLC membership, which the broker lacked. The court also denied the broker’s request for a jury trial on the unjust enrichment claim, holding that both the claim and the defense of unclean hands were equitable issues for the judge. After a bench trial, the court ruled against the broker on unjust enrichment, finding he failed to prove his claim and that unclean hands barred recovery.On appeal, the Indiana Court of Appeals reversed, holding that initial LLC membership could be established by oral agreement and that unjust enrichment claims for money damages were legal claims entitled to a jury trial. The Indiana Supreme Court granted transfer, vacating the appellate decision.The Indiana Supreme Court held that LLC membership under the Business Flexibility Act requires either a written operating agreement or written confirmation, and the broker was not a member as a matter of law. However, genuine factual disputes remained regarding whether the brothers breached an agreement to make him a member, precluding summary judgment. The Court also held that unjust enrichment claims for money damages are legal claims subject to a jury trial, and the unclean hands doctrine may be asserted as a defense. The judgment was vacated and the case remanded for a jury trial on both claims. View "Andrew Nemeth Properties, LLC v. Panzica" on Justia Law

Two individuals, Kellogg and Mathiesen, formed a limited liability company (LLC) to provide in-home personal care services. Over time, disputes arose regarding ownership interests, capital contributions, and management of the company. The parties executed several agreements, including a 2017 contract transferring Mathiesen’s ownership to Kellogg due to his ineligibility as a Medicaid provider, and a 2019 contract in which Kellogg sold Mathiesen a 50% interest in the LLC’s assets. Allegations of mismanagement, misuse of company funds, and inappropriate conduct by Mathiesen led to litigation between the parties, including derivative claims and counterclaims. Kellogg also sought judicial dissolution of the LLC, citing unlawful conduct and irreconcilable differences.The District Court for Douglas County held a bench trial and found both Kellogg and Mathiesen to be 50-percent co-owners or managers of the LLC. The court denied all derivative claims and counterclaims, citing unclean hands by both parties. However, the court granted Kellogg’s application for dissolution, finding Mathiesen’s conduct oppressive and fraudulent, and ordered the appointment of a receiver to oversee the dissolution and possible sale of the company. Mathiesen appealed both the judgment and the receiver’s appointment.The Nebraska Supreme Court reviewed the consolidated appeals, limiting its review to plain error due to deficiencies in Mathiesen’s appellate briefing. The court determined it had jurisdiction over both appeals and addressed Mathiesen’s argument that Kellogg lacked standing. The court held that Kellogg remained a member of the LLC at the time of filing her derivative action and thus had standing. Finding no plain error in the record, the Nebraska Supreme Court affirmed the district court’s judgment and the order appointing a receiver. View "Kellogg v. Mathiesen" on Justia Law

Pro-Mark Services, Inc., a general contracting construction company, obtained payment and performance bonds from Hartford Accident and Indemnity Company as required by the Miller Act. To facilitate this, Pro-Mark and other indemnitors entered into a General Indemnity Agreement (GIA) with Hartford, assigning certain rights related to bonded contracts. Later, Pro-Mark entered into two substantial business loan agreements with Capital Credit Union (CCU), secured by most of Pro-Mark’s assets, including deposit accounts. Recognizing potential conflicts over asset priorities, Hartford and CCU executed an Intercreditor Collateral Agreement (ICA) to define their respective rights and priorities in Pro-Mark’s assets, distinguishing between “Bank Priority Collateral” and “Surety Priority Collateral,” and specifying how proceeds should be distributed.After Pro-Mark filed for chapter 7 bankruptcy in the United States Bankruptcy Court for the District of North Dakota, CCU placed an administrative freeze on Pro-Mark’s deposit accounts and moved for relief from the automatic stay to exercise its right of setoff against the funds in those accounts. Hartford objected, claiming a superior interest in the funds based on the GIA and ICA. The bankruptcy court held hearings and, after considering the parties’ briefs and stipulated facts, granted CCU’s motion, allowing it to set off the funds. The bankruptcy court found CCU had met its burden for setoff and determined Hartford did not have a sufficient interest in the deposited funds, focusing on the GIA and North Dakota’s Uniform Commercial Code, and not the ICA.On appeal, the United States Bankruptcy Appellate Panel for the Eighth Circuit held that while the bankruptcy court had authority to adjudicate the priority dispute, it erred by failing to analyze the parties’ respective rights under the ICA, which governed the priority of distributions. The Panel reversed the bankruptcy court’s order and remanded the case for further proceedings consistent with its opinion. View "Hartford Accident and Indemnity Company v. Capital Credit Union" on Justia Law

Cherry Oil is a closely held corporation in eastern North Carolina, primarily owned and managed by members of the Cherry and Mauck families. Armistead and Louise Mauck, who together own 34% of the company’s shares, became involved in the business after Armistead was invited to join during a period of financial difficulty. In 1998, the families formalized their relationship through a Shareholder Agreement, which included provisions allowing either party to force a buyout of shares at fair market value. Over time, disputes arose regarding management and succession, culminating in the Maucks’ removal from the board and Cherry Oil’s attempt to buy out their shares. The buyout process stalled, leaving the Maucks as minority shareholders no longer employed by the company.The Maucks filed suit in Superior Court, Lenoir County, asserting claims for judicial dissolution under N.C.G.S. § 55-14-30, breach of fiduciary duty, constructive fraud, and breach of the Shareholder Agreement. The case was designated a mandatory complex business case and assigned to the North Carolina Business Court. The Business Court dismissed most claims, including the judicial dissolution claim for lack of standing, finding that the Shareholder Agreement’s buyout provision provided an adequate remedy. It also dismissed other claims for reasons such as untimeliness and insufficient factual allegations. The court later granted summary judgment to defendants on the remaining claims, concluding that the actions taken by the Cherry family were valid corporate acts and that the Maucks had not demonstrated breach of duty or contract.On appeal, the Supreme Court of North Carolina held that the Maucks did have standing to seek judicial dissolution but affirmed the dismissal of that claim under Rule 12(b)(6), finding that the Shareholder Agreement’s buyout provision provided a sufficient remedy and that the complaint did not allege facts showing dissolution was reasonably necessary. The Supreme Court otherwise affirmed the Business Court’s rulings. View "Mauck v. Cherry Oil Co." on Justia Law

A group of dentists, who are both members of a nonprofit mutual benefit corporation and parties to provider agreements with that corporation, challenged the corporation’s decision to unilaterally amend its fee schedules and related rules. The provider agreements allowed the corporation to set the fees paid to dentists for services rendered to plan enrollees, and the agreements, as amended by a 2018 settlement, expressly permitted the corporation to make unilateral changes to the fee structure with 120 days’ notice, during which dentists could terminate their agreements if they did not accept the new terms. In 2022, the corporation announced further amendments that, according to the dentists, reduced fees and altered the fee determination process. The dentists alleged that these changes breached the implied covenant of good faith and fair dealing in their provider agreements and that certain directors breached fiduciary duties owed to them as members.The Superior Court of San Francisco City and County sustained demurrers by all defendants without leave to amend. The court found that the corporation could not breach the implied covenant by exercising rights expressly granted in the agreements, and that the directors owed no fiduciary duty to the dentists in connection with the corporation’s exercise of its contractual rights to amend fee schedules.The California Court of Appeal, First Appellate District, Division One, affirmed the trial court’s judgment. The court held that the implied covenant of good faith and fair dealing cannot be used to override or limit a party’s express contractual right to unilaterally amend fee schedules, provided the contract is supported by consideration and the changes are prospective, with adequate notice and an opportunity to terminate. The court also held that directors of a nonprofit mutual benefit corporation owe fiduciary duties to the corporation itself, not to individual members in their capacity as contracting parties. View "California Dental Assn. v. Delta Dental of California" on Justia Law

A pathologist who was an officer, director, shareholder, and employee of a closely held professional corporation was subject to annual employment agreements and the corporation’s bylaws, which required shareholders to be employed by the corporation. The employment agreement allowed for termination “for any reason or no reason,” and the bylaws provided that a shareholder who ceased to be an employee would have their shares redeemed at book value. After several incidents involving the pathologist’s performance, the board voted not to renew his employment agreement. As a result, his employment ended, and the corporation sought to redeem his shares at book value, as specified in the bylaws.The pathologist filed suit in the District Court for Lancaster County, alleging breach of fiduciary duty, shareholder oppression justifying judicial dissolution, and seeking declaratory relief regarding the value of his shares and the enforceability of a noncompetition provision. The corporation moved for summary judgment. The district court granted summary judgment in part, dismissing claims related to termination of employment and the noncompetition provision, but allowed discovery and further proceedings on the valuation and redemption of shares. After additional discovery, the corporation again moved for summary judgment. The district court granted summary judgment on the remaining claims, finding no genuine issue of material fact and that the corporation had acted in accordance with the agreements. The court also denied the pathologist’s motions to compel further discovery and to continue the summary judgment hearing.On appeal, the Nebraska Supreme Court reviewed the grant of summary judgment de novo and the discovery rulings for abuse of discretion. The court held that the pathologist had no reasonable expectation of continued employment given the clear terms of the agreements he signed, and that the corporation’s actions in redeeming his shares at book value did not constitute a breach of fiduciary duty or shareholder oppression. The court affirmed the district court’s judgment in all respects. View "Noel v. Pathology Med. Servs." on Justia Law

A fuel distribution company sought to acquire a competitor in Western Alaska, prompting the State to sue for anticompetitive conduct under Alaska’s consumer protection laws. To resolve the dispute, the State and the company negotiated a consent decree requiring the company to divest a portion of its fuel storage capacity in Bethel to another distributor, Delta Western, before completing the acquisition. The consent decree specified that it would expire in 30 years or could be dissolved by court order for good cause. Delta Western was not a party to the consent decree, but entered into a separate fuel storage contract with the acquiring company as required by the decree. The contract’s term extended beyond the initial five years at Delta Western’s option.Years later, the Superior Court for the State of Alaska, Second Judicial District, Nome, dissolved the consent decree at the acquiring company’s request. The company then notified Delta Western that it considered the fuel storage contract terminated as a result. Delta Western filed a breach of contract action in Anchorage Superior Court, seeking to enforce the contract and arguing that its terms were independent of the consent decree. The contract case was transferred to Nome Superior Court, which issued a preliminary ruling that the contract remained valid despite the dissolution of the consent decree. The court also vacated its initial order dissolving the consent decree to allow Delta Western to intervene and present its position.The Supreme Court of the State of Alaska reviewed whether dissolution of the consent decree automatically terminated the fuel storage contract and whether the superior court abused its discretion by permitting Delta Western to intervene. The court held that dissolution of the consent decree did not automatically void the contract between the parties, and that the superior court did not abuse its discretion in allowing Delta Western to intervene. The Supreme Court affirmed the superior court’s decisions and lifted the stay on the contract case. View "Crowley Marine Services, Inc. v. State of Alaska" on Justia Law

Two parties, both experienced in the grocery business, negotiated the sale of a grocery store’s inventory, stock, and equipment for $175,000. The agreement was reached orally and memorialized with a handshake, but no written contract was signed. Following the oral agreement, the buyers took control of the store, closed it for remodeling, met with employees, and were publicly identified as the new owners. However, within two weeks, the buyers withdrew from the deal, citing issues with a third-party wholesaler. The sellers, having already closed the store and lost perishable goods, were unable to find another buyer and subsequently filed suit.The sellers brought ten claims in the Lee County Circuit Court, including breach of contract, estoppel, and negligent misrepresentation. The buyers moved to dismiss, arguing that the Statute of Frauds barred enforcement of the oral agreement because the sale involved goods valued over $500 and no signed writing existed. The circuit court agreed, dismissing the contract and estoppel-based claims, as well as the negligent misrepresentation claim, but allowed other claims to proceed. The sellers appealed the dismissal of the contract and estoppel claims.The Supreme Court of Mississippi reviewed the case de novo. It held that the sellers’ complaint plausibly invoked two exceptions to the Statute of Frauds under Mississippi law: the merchants’ exception and the part-performance exception. The Court found that, at the motion to dismiss stage, it could not determine as a matter of law that no valid contract existed under these exceptions. Therefore, the Supreme Court of Mississippi reversed the circuit court’s dismissal of claims (1) through (7) and remanded the case for further proceedings. View "Palmer's Grocery Inc. v. Chandler's JKE, Inc." on Justia Law

WorldVue Connect, LLC, a company specializing in in-room entertainment and technology for hotels, purchased the domestic assets of Hospitality WiFi, LLC from Jason Szuch for $9,450,000 in 2022. Szuch retained interests in international affiliates and received a minority stake in a new entity, WorldVue Global, LLC. The transaction included the transfer of goodwill, trade secrets, and a valuable technical support team. In 2024, after the business relationship soured, WorldVue bought out Szuch’s minority interest and entered into a settlement agreement with Szuch and his companies, as well as a separation agreement with a key employee, Shan Griffin. These agreements, governed by Texas law, contained non-compete, non-solicitation, and confidentiality provisions effective for one year.Following the agreements, evidence emerged that the Szuch Parties recruited WorldVue’s employees and independent contractors, including those providing remote support to clients in the contractually defined “Restricted Area.” WorldVue filed suit in Texas state court for breach of contract and tortious interference, seeking injunctive relief. The state court issued a temporary restraining order, and after removal to the United States District Court for the Southern District of Texas, the TRO was extended. The district court found that the Szuch Parties breached the agreements by soliciting WorldVue’s workers and using confidential information, and granted a preliminary injunction prohibiting further solicitation and use of confidential information.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the preliminary injunction for abuse of discretion. The court affirmed the injunction, holding that the non-solicitation provision applied to workers performing services in the Restricted Area, regardless of their physical location, and that customer service agents were covered as independent contractors. The court modified the injunction to clarify that “confidential information” does not include Szuch’s personal knowledge of worker identities acquired prior to the asset sale. View "WorldVue Connect v. Szuch" on Justia Law