Justia Contracts Opinion Summaries

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

The dispute arose between two longtime business partners who co-owned interests in several companies, including a parking facility management business. During the COVID-19 pandemic, the business faced financial difficulties, prompting the partners to seek a federal loan. One partner, who was in a position to influence the loan’s approval, allegedly pressured the other to sell his business interests at a reduced price, threatening to block the loan if the sale did not proceed. The sale was formalized through several transfer agreements containing broad releases of claims. The selling partner later sued, alleging he signed the agreements under duress and as a result of fraud.The case was first heard in the Minnesota District Court, which dismissed the complaint in its entirety, finding that the releases in the transfer agreements barred all claims. The district court also awarded costs and attorney fees to the defendants as prevailing parties under the agreements. The district court further held that the plaintiff was required to return the consideration received to void the releases, and, in the alternative, found that some claims failed on their own merits. The Minnesota Court of Appeals affirmed the dismissal, but on different grounds, holding that the plaintiff’s complaint failed to allege sufficient facts to invalidate the releases and thus the claims were barred. The appellate court also affirmed the award of costs and attorney fees.The Minnesota Supreme Court reviewed the case and clarified the pleading standard for motions to dismiss based on affirmative defenses. The court held that a plaintiff’s complaint does not need to anticipate and rebut an affirmative defense to survive a motion to dismiss; dismissal is only appropriate if the complaint’s allegations, construed in the plaintiff’s favor, establish an unrebuttable defense. The court reversed the lower courts’ dismissal of the complaint and the award of costs and attorney fees, and remanded the case for further proceedings. View "Hoskin vs. Krsnak" on Justia Law

Three individuals, including the appellant, formed a limited liability company (LLC) to design and sell firearms products, later adding two more members to a second LLC. The first LLC did not have a formal operating agreement, while the second adopted one in early 2019, setting a low company valuation. The appellant’s behavior became erratic and disruptive, leading to accusations against a key business partner and other members, which damaged business relationships and led to the loss of significant contracts. The remaining members of both LLCs unanimously voted to dissociate the appellant, citing his conduct as making it unlawful to continue business with him. The appellant disputed the validity of the operating agreement in the second LLC and challenged the valuation of his interests in both companies, also alleging wrongful dissociation, defamation, and conversion of property.The Eleventh Judicial District Court, Flathead County, granted summary judgment to the defendants on all claims. The court found the appellant was properly dissociated from the first LLC under Montana’s Limited Liability Company Act due to the unanimous vote and the unlawfulness of continuing business with him. It also held that the second LLC’s operating agreement was valid and permitted dissociation by unanimous vote. The court valued the appellant’s interests according to the operating agreement for the second LLC and based on company assets for the first LLC. The court denied the appellant’s motion to extend expert disclosure deadlines and partially denied his motion to compel discovery. It also granted summary judgment to the defendants on the conversion claim, finding no evidence of unauthorized control over the appellant’s property.The Supreme Court of the State of Montana affirmed the lower court’s rulings on dissociation and valuation regarding the second LLC, as well as the summary judgment on the conversion claim. However, it reversed the valuation of the appellant’s interest in the first LLC, holding that the district court erred by failing to consider the company’s “going concern” value as required by statute. The case was remanded for further proceedings on that issue. View "Herbert v. Shield Arms" on Justia Law

Steven Meads and Penny Lipking-Meads operated a business as a sole proprietorship before partnering with Jed Driggers in 2010 to expand the business. The parties formed Afterburner, LLC, with the Meadses and Driggers as members, and Driggers as manager. The Meadses contributed assets and goodwill, while Driggers provided capital and expertise. The LLC’s operating agreement included a provision stating that the LLC could only be dissolved by a vote of the members or bankruptcy/insolvency, and that members agreed not to take any other voluntary action to dissolve the LLC, effectively waiving the right to seek judicial dissolution under certain statutory circumstances.A decade later, the Meadses alleged Driggers had improperly diverted business funds and filed a lawsuit in the Superior Court of Siskiyou County seeking, among other relief, judicial dissolution of the LLC. Driggers and the LLC filed a cross-complaint for breach of contract and breach of fiduciary duty, arguing that the Meadses violated the operating agreement’s waiver provision by seeking dissolution. The Meadses responded with a motion to strike the cross-complaint under California’s anti-SLAPP statute, contending that the waiver provision was unenforceable as contrary to law and public policy. The Superior Court granted the anti-SLAPP motion, finding the cross-complaint arose from protected activity and that Driggers could not show a probability of prevailing.The California Court of Appeal, Third Appellate District, reviewed the case and affirmed the trial court’s order. The appellate court held that, under the Beverly-Killea Limited Liability Company Act, an LLC operating agreement may not waive or vary a member’s statutory right to seek judicial dissolution in the circumstances specified by law. The court concluded that the waiver provision was void and unenforceable, and thus Driggers could not prevail on his cross-complaint. The order striking the cross-complaint was affirmed. View "Meads v. Driggers" on Justia Law

Two business compliance companies entered into a partnership to develop a software product, with one company providing “white-label” services to the other. The partnership was formalized in a written agreement, but disputes arose over performance, payment for out-of-scope work, and the functionality of the software integration. As the relationship deteriorated, the company that had sought the services began developing its own infrastructure, ultimately terminating the partnership and launching a competing product. The service provider alleged that its trade secrets and proprietary information were misappropriated in the process.The United States District Court for the Eastern District of Pennsylvania presided over a jury trial in which the service provider brought claims for breach of contract, trade secret misappropriation under both state and federal law, and unfair competition. The jury found in favor of the service provider, awarding compensatory and punitive damages across the claims. The jury specifically found that six of eight alleged trade secrets were misappropriated. The defendant company filed post-trial motions for judgment as a matter of law, a new trial, and remittitur, arguing insufficient evidence, improper expert testimony, and duplicative damages. The District Court denied these motions.On appeal, the United States Court of Appeals for the Third Circuit reviewed the District Court’s rulings. The Third Circuit held that the defendant had forfeited its argument regarding the protectability of the trade secrets by not raising it with sufficient specificity at trial, and thus assumed protectability for purposes of appeal. The court found sufficient evidence supported the jury’s finding of misappropriation by use, and that the verdict was not against the weight of the evidence. The court also found no reversible error in the admission of expert testimony. However, the Third Circuit determined that the damages awarded for trade secret misappropriation and unfair competition were duplicative, and conditionally remanded for remittitur of $11,068,044, allowing the plaintiff to accept the reduced award or seek a new trial on damages. View "Harbor Business Compliance Corp v. Firstbase IO Inc" on Justia Law