Justia Contracts Opinion Summaries

A Nebraska limited liability company owned by Michael Perkins hired RMR Building Group, LLC, managed and solely owned by Robert M. Ryan II, as a general contractor to redevelop a shopping center. Their contract used a cost-plus billing arrangement, where Perkins paid RMR in advance for specific construction costs, including a substantial sum for HVAC equipment and RMR’s fee. RMR deposited the funds into its general operating account but did not pay for the HVAC equipment; instead, it used the money to cover other business obligations. Perkins terminated the contract after RMR failed to provide proof of payment for the equipment and then sued RMR and Ryan for breach of contract, unjust enrichment, conversion, and fraudulent misrepresentation, also seeking to pierce the corporate veil and hold Ryan personally liable.The District Court for Douglas County found that RMR breached the contract and was liable under theories of money had and received and unjust enrichment, but not for conversion or fraudulent misrepresentation. The court declined to disregard RMR’s corporate entity, finding no sufficient evidence that Ryan diverted funds for personal use or that RMR was a mere facade for Ryan’s dealings. Perkins appealed these findings.The Nebraska Court of Appeals reversed in part, concluding that the corporate veil should be pierced and Ryan held jointly and severally liable for the misappropriated funds, relying on factors from United States Nat. Bank of Omaha v. Rupe. On further review, the Nebraska Supreme Court reversed the Court of Appeals, holding that the evidence did not establish by a preponderance that RMR’s entity should be disregarded, nor did it support fraud or conversion claims against Ryan. The Supreme Court remanded with direction to affirm the district court’s judgment. View "Perkins v. RMR Building Group" on Justia Law

A minor league baseball team in Oregon lost its longstanding affiliation with a Major League Baseball (MLB) club after MLB restructured its relationship with minor league teams in 2020. The team’s owner alleges that a minority owner of an MLB franchise, who also served on the board and a negotiation committee of the national minor league association, acted to reduce the number of minor league clubs for personal gain, which resulted in the team’s exclusion from the new affiliation structure. The owner claims that the association’s rules left it dependent on the board and committee members to protect its interests.The United States District Court for the District of New Jersey dismissed the owner’s complaint, finding that it failed to plausibly allege the existence of a fiduciary relationship between the board member and the team. The owner appealed, arguing that fiduciary duties arose under Florida’s non-profit statute, by contract, or by implication due to the structure of the association and the interactions between the parties.The United States Court of Appeals for the Third Circuit reviewed the District Court’s dismissal de novo. The Third Circuit held that Florida’s non-profit statute does not create a fiduciary duty from a director to the members of the non-profit, only to the corporation itself. The court also found no express or implied fiduciary duty arising from contractual provisions or the surrounding circumstances. The court distinguished direct and derivative actions and concluded that the complaint did not allege facts to support a direct or implied fiduciary relationship. Accordingly, the Third Circuit affirmed the District Court’s dismissal of the complaint for failure to state a claim. View "Sports Enterprises Inc v. Goldklang" on Justia Law

The case centers on a dispute between a former employee and his employer regarding an alleged agreement to transfer company stock. The plaintiff, who had worked for the employer for many years and was promoted several times, claimed that he was promised a portion of stock if he remained employed through a specific date. This promise was allegedly memorialized in a 2018 letter from one of the company’s owners. After the plaintiff fulfilled his employment commitment but did not receive the stock, he sued the company and several individuals for promissory estoppel, fraud, and breach of contract.Previously, the District Court of the Fourth Judicial District, Ada County, reviewed the case. The court granted summary judgment to two individual defendants, dismissing them from the suit. The plaintiff’s claims against the remaining defendants proceeded to a bench trial. After trial, the district court found in favor of the company and its owner on all counts, concluding there was no enforceable contract due to the absence of an essential term—price—and insufficient evidence of fraud. The court also awarded attorney fees to both the company and the owner.The Supreme Court of the State of Idaho affirmed the district court’s dismissal of the breach of contract and fraud claims, agreeing that the 2018 letter did not create an enforceable contract and that there was no clear and convincing evidence of fraud. The Supreme Court also affirmed the award of attorney fees to the owner but vacated the fee award to the company, finding the company’s initial fee request procedurally deficient. The case was remanded for entry of an amended judgment consistent with these findings. Attorney fees and costs on appeal were awarded to the owner, but not to the company. View "York v. Kemper Northwest, Inc." on Justia Law

A publicly traded investment banking corporation entered into a stockholders agreement with an entity controlled by its founder in 2014, contemporaneous with its initial public offering. The agreement granted the founder’s entity extensive governance rights, including restrictions on board actions and control over board and committee composition, provided certain ownership and other conditions remained met. These arrangements and the founder’s control were disclosed in the company’s IPO prospectus and subsequent public filings. Nearly nine years later, a Class A stockholder filed suit seeking a declaratory judgment that key provisions of the stockholders agreement were facially invalid under Section 141(a) of the Delaware General Corporation Law, which vests management authority in the board of directors unless otherwise provided in the certificate of incorporation.The Court of Chancery of the State of Delaware denied the company’s time-bar and laches defenses, holding that if the challenged provisions violated Section 141(a), they were void rather than voidable, and therefore not subject to equitable defenses like laches. The court further reasoned that the alleged statutory violation was ongoing, so the claim was not untimely even though it was brought many years after the agreement was executed. The court proceeded to find that several provisions of the stockholders agreement facially violated Section 141(a), declared them void and unenforceable, and later awarded attorney fees to the plaintiff.On appeal, the Supreme Court of the State of Delaware reversed. It held that to the extent the challenged provisions conflicted with Section 141(a), they were voidable—not void—and thus subject to equitable defenses, including laches. The Supreme Court concluded that the plaintiff’s claim accrued when the agreement was executed in 2014, that the delay in bringing suit was unreasonable, and that the claim was barred by laches. The Supreme Court vacated the declaratory judgment and fee award, declining to reach the merits of the facial validity of the agreement’s provisions. View "Moelis & Company v. West Palm Beach Firefighters' Pension Fund" on Justia Law

An individual who founded a Michigan biomedical research company sold a majority stake in 2019 to four defendants but retained a minority interest, later becoming dissatisfied with the company’s management and moving out of state. The new owners aimed to expand the company but withheld information from the plaintiff about their efforts to secure financing, including discussions with Avista Capital Partners, a venture capital firm that ultimately made a large investment. The plaintiff sold his shares in December 2020 for a price based on an annual valuation, prior to Avista’s capital infusion that significantly increased the company’s value. The plaintiff later sued, alleging violations of federal and state securities laws, breach of fiduciary duty under Michigan law, and various fraud and contract claims based on the defendants’ failure to disclose material facts about the company’s pursuit of equity financing and Avista’s interest.The case was first heard in the United States District Court for the Western District of Michigan. That court denied the defendants’ motion to dismiss but, following discovery, granted summary judgment in favor of the defendants on all counts. The court concluded that the omissions were not material under federal securities law and, applying Delaware law and a federal standard, also found no materiality for the breach of fiduciary duty claim under Michigan law.On appeal, the United States Court of Appeals for the Sixth Circuit affirmed the district court’s summary judgment as to the federal securities law claims, the Michigan Uniform Securities Act claim, and the contract-based claims, holding that the omissions were not material under the applicable federal standards. However, the Sixth Circuit reversed the summary judgment for the Michigan common-law fiduciary duty and fraud claims, finding the district court had applied an incorrect legal standard and that genuine disputes of material fact remained. The case was remanded for further proceedings on the fiduciary duty and fraud counts. View "Boyd v. Northern Biomedical Research Inc." on Justia Law

Getty Images Holdings, Inc. became a publicly traded company after merging with CC Neuberger Principal Holdings II, a special purpose acquisition company. Alta Partners, LLC and CRCM Institutional Master Fund (BVI) Ltd., along with CRCM SPAC Opportunity Fund LP, acquired warrants to purchase Getty stock. The warrants’ exercise was governed by a warrant agreement requiring both an effective registration statement and a current prospectus for the underlying shares. After the merger, Getty filed two relevant registration statements: a Form S-4 and a Form S-1. Alta and CRCM attempted to exercise their warrants in August 2022, when Getty’s stock price was significantly higher than the warrant strike price, but Getty refused, claiming the contractual conditions for exercise were unmet.The United States District Court for the Southern District of New York reviewed breach of contract claims brought by Alta and CRCM. The court granted summary judgment for the plaintiffs, finding as a matter of law that the conditions of the warrant agreement had been satisfied. Specifically, it held the Form S-4 was an effective registration statement for the warrant shares and the accompanying prospectus was current at the time the plaintiffs attempted to exercise their warrants. The court awarded damages based on the stock price at the time of the breach but limited Alta’s recovery, denying damages for warrants purchased after Getty’s refusal to honor the redemption.The United States Court of Appeals for the Second Circuit affirmed the district court’s judgment. It held that Getty breached the warrant agreement because the required registration statement and prospectus conditions were met on the relevant dates. The court concluded that damages should be calculated using the market price of the shares at the time of breach and upheld the limitation on Alta’s damages for post-breach warrant purchases. The affirmance applies to all aspects of the district court’s rulings challenged on appeal. View "Alta Partners, LLC v. Getty Images Holdings, Inc." on Justia Law

Johnson & Johnson acquired Auris Health, a medical robotics company, in a transaction where Auris’s shareholders could earn up to $2.35 billion in additional payments if certain regulatory and sales milestones were met for Auris’s surgical devices. These milestones required Johnson & Johnson to use “commercially reasonable efforts,” defined by the contract as efforts comparable to those used for its own priority devices. All regulatory milestones were expressly conditioned on achieving specific FDA “510(k) premarket notification” approvals. After none of the milestones were met, Fortis Advisors, representing Auris’s former shareholders, sued, alleging that Johnson & Johnson failed to meet its efforts obligations and fraudulently induced Auris into accepting a contingent payment for one milestone by misrepresenting its likelihood.The Delaware Court of Chancery held a trial and found largely in Fortis’s favor. The court ruled that Johnson & Johnson breached the contract by not applying the required level of effort to Auris’s iPlatform system and acted with the intent to avoid earnout payments. For the first milestone, the court relied on the implied covenant of good faith and fair dealing to require Johnson & Johnson to pursue an alternate FDA pathway when the original 510(k) process became unavailable. The court also found that Johnson & Johnson fraudulently induced Auris to accept a contingent payment for the Monarch lung ablation milestone by portraying its achievement as almost certain, despite knowing of a recent patient death and an ongoing FDA investigation.On appeal, the Supreme Court of Delaware agreed with Johnson & Johnson regarding the implied covenant, holding that the merger agreement did not contain a contractual gap and that the risk of an unavailable 510(k) pathway was foreseeable and allocated by the contract. The court reversed the Chancery’s ruling that Johnson & Johnson was required to pursue an alternative regulatory pathway for the first milestone and vacated the related damages. The Supreme Court otherwise affirmed the findings on breach of contract for the remaining milestones, upheld the damages calculation for those, and affirmed the fraud finding and the conclusion that the contract did not bar extra-contractual fraud claims. The case was remanded for recalculation of damages consistent with this opinion. View "Johnson & Johnson v. Fortis Advisors LLC" on Justia Law

37celsius Capital Partners, a Milwaukee-based firm specializing in healthcare-related businesses, sought to acquire Care Innovations, a subsidiary of Intel Corporation. The parties entered into a nondisclosure agreement containing a “Hold Harmless” clause that limited damages, and subsequently executed a term sheet outlining the proposed transaction. The term sheet required 37celsius to contribute $12 million by a specified closing date and granted it an exclusivity period during which Intel could not negotiate with other parties regarding Care Innovations. The term sheet expressly limited legal obligations, stating that no binding contract would exist until a definitive agreement was executed, except for certain provisions such as confidentiality and exclusivity.After 37celsius failed to provide proof of the required funds by the closing date, Intel sold Care Innovations to another buyer. 37celsius filed suit in Wisconsin state court, alleging breach of contract based on Intel’s communications with third parties during the exclusivity period. The defendants removed the case to the United States District Court for the Eastern District of Wisconsin, which ruled that 37celsius was not entitled to expectation damages under the NDA and subsequently granted summary judgment for Intel, finding no reliance damages and no evidence of causation.The United States Court of Appeals for the Seventh Circuit reviewed the district court’s summary judgment de novo. It held that the term sheet was not a binding “Type II” preliminary agreement under Delaware law, as its language did not obligate the parties to negotiate in good faith. Further, even if a binding obligation existed, 37celsius could not show that Intel’s alleged breach was the but-for cause of the failed transaction, as 37celsius did not have the required funds. The court also concluded that the NDA barred expectation damages and 37celsius did not appeal the denial of reliance damages. The Seventh Circuit affirmed the district court’s judgment for Intel. View "37celsius Capital Partners, L.P. v Intel Corporation" on Justia Law

Two companies, Gulf Coast Investments, LLC and Trigger Energy Holdings, LLC, sold their membership interests in Blueprint Energy Partners, LLC to TCU Holdings, LLC. Blueprint, formed in 2017 for shale oil operations in Wyoming, originally had three equal members: Gulf Coast, Trigger, and TCU, with Aladdin Capital, Inc. as the manager and primary creditor. After financial struggles and interpersonal conflicts, the parties negotiated the buyout in 2019. TCU’s principal, Kent Stevens, threatened to leave and take staff and clients unless Gulf Coast and Trigger agreed to a set price, known as the “dynamite option.” Despite these threats, the plaintiffs were represented by counsel who advised them of alternatives, and negotiations spanned several months, culminating in a signed purchase agreement.The Circuit Court of the Second Judicial Circuit, Minnehaha County, South Dakota, reviewed the plaintiffs’ post-sale lawsuit alleging economic duress, breach of operating agreement, breach of fiduciary duty, tortious interference, shareholder oppression, unjust enrichment, and sought accounting and injunctive relief. The circuit court granted summary judgment for the defendants on all counts, reasoning that the plaintiffs voluntarily entered the agreement, had legal alternatives, and that the contract itself contained a waiver of further claims. The court also addressed each substantive claim on its merits, finding no legal basis for recovery.On appeal, the Supreme Court of the State of South Dakota affirmed the circuit court’s grant of summary judgment. The Supreme Court held that, under either the three-part or two-part test for economic duress, the plaintiffs failed to show involuntary acceptance or lack of reasonable alternatives. The court also found no breach of the operating agreement or fiduciary duties, no tortious interference or shareholder oppression, and no basis for unjust enrichment or usurpation. The holding confirms the validity and enforceability of the purchase agreement and disposes of all claims against the defendants. View "Trigger Energy Holdings v. Stevens" on Justia Law

Two entities formed a limited liability company in 2012 to operate a high-end hair salon in Portsmouth, New Hampshire. One party contributed financial resources and business expertise, while the other, an established stylist, provided day-to-day management and became the public face of the business. In 2016, they amended their operating agreement to clarify their roles, contributions, and restrictions, including a provision that neither member could transfer their interest in the company without majority approval from disinterested members. The agreement required the stylist to devote all her business time to the company and prohibited competition during membership but was silent on withdrawal by a member.In 2022, after unsuccessful buyout negotiations, the stylist gave notice of her withdrawal from the company. The remaining members sued for breach of fiduciary duty, breach of contract, and sought a declaratory judgment requiring the stylist to continue dedicating her business time to the company. The Superior Court for Rockingham County granted in part and denied in part the stylist’s motion to dismiss, ruling her withdrawal was valid under the operating agreement and the New Hampshire Limited Liability Company Act. As a result, claims relying on her continued membership were dismissed, though the breach of contract claim for pre-withdrawal conduct was initially preserved. The plaintiffs withdrew the remaining contract claim, and the dismissal orders were finalized for appeal.Upon review, the Supreme Court of New Hampshire affirmed the lower court’s decision. It held that the operating agreement did not prohibit member withdrawal and that withdrawal was not a “transfer” requiring approval under the agreement. The court determined that the stylist retained her economic interest but lost membership rights upon withdrawal, consistent with the statute. The court further found no viable claim for damages or wrongful conduct, as the withdrawal did not breach the agreement or applicable law. View "Peregrine Interests LLC v. Todd" on Justia Law