Justia Contracts Opinion Summaries

Plaintiff and defendant were business associates who sought to purchase three restaurants known as Jib Jab. Plaintiff, with a background in investing, initiated negotiations and sought a partner with restaurant experience, leading to an oral agreement with defendant. Plaintiff was to handle acquisition terms and financing, while defendant would manage operations. No written partnership agreement was executed. Both parties made several unsuccessful attempts to secure financing, including SBA loans, but neither was willing to personally guarantee the loan, and plaintiff refused to pay off defendant’s unrelated SBA debts. Eventually, defendant proceeded alone, secured financing, and purchased Jib Jab through an entity he formed, without plaintiff’s involvement.Plaintiff filed suit in the Superior Court, Mecklenburg County, alleging the formation of a common law partnership and asserting direct and derivative claims against defendant and the purchasing entity, including breach of partnership agreement, breach of fiduciary duty, tortious interference, misappropriation of business opportunity, and requests for judicial dissolution and accounting. Defendants moved for partial judgment on the pleadings, resulting in dismissal of all derivative claims, certain direct claims, and claims for constructive trust. The remaining claims were plaintiff’s direct claims for breach of partnership agreement, breach of fiduciary duty, tortious interference, and claims for judicial dissolution and accounting.On appeal, the Supreme Court of North Carolina reviewed the Business Court’s orders. The Supreme Court affirmed the dismissal of derivative claims, holding that North Carolina law does not permit derivative actions by a general partner on behalf of a general partnership. The Court also affirmed the dismissal of conclusory tortious interference claims and upheld the Business Court’s decision to strike portions of plaintiff’s affidavit and disregard an unsworn expert report. Finally, the Supreme Court modified and affirmed summary judgment for defendants, holding that no partnership existed due to lack of agreement on material terms, and that plaintiff failed to show he could have completed the purchase but for defendant’s actions. View "Cutter v. Vojnovic" on Justia Law

A waste hauling company operating in Kansas City brought suit against a mobile waste compaction business and its franchisor. The waste hauler owns containers that are leased to customers, who sometimes contract separately with the compaction company to compress waste inside those containers. The hauler alleged that the compaction company’s activities damaged its containers and interfered with its business relationships. The hauler sought various forms of relief, including damages, injunctive and declaratory relief, and nominal damages, but ultimately disavowed any claim for actual monetary damages, citing a lack of evidence to support such damages.The United States District Court for the Western District of Missouri denied the hauler’s request for a temporary restraining order, finding no irreparable harm. During discovery, the hauler admitted it could not identify or quantify any actual damages and stipulated it was not seeking damages outside Kansas City. The district court granted the compaction company’s motion to strike the hauler’s jury demand, holding that the hauler had not presented evidence of compensatory damages, that nominal damages were unavailable under Missouri law for the claims asserted, and that the remaining claims were equitable in nature. After a bench trial, the district court entered judgment for the compaction company and its franchisor, finding the hauler failed to prove essential elements of its claims, including actual damages and direct benefit conferred for unjust enrichment.On appeal, the United States Court of Appeals for the Eighth Circuit affirmed. The court held that the hauler was not entitled to a jury trial under the Seventh Amendment because it failed to present evidence of compensatory damages and nominal damages were not available for its claims under Missouri law. The court also affirmed judgment for the compaction company on the trespass to chattels and unjust enrichment claims, finding the hauler failed to prove dispossession, damages, or a direct benefit conferred. View "Allied Services v. Smash My Trash, LLC" on Justia Law

A trading company and a base oil manufacturer entered into a sales agreement in 2016, under which the manufacturer would serve as the exclusive North American sales representative for a high-quality base oil product distributed by the trading company. The agreement included noncompete provisions and was set to expire at the end of 2021. In late 2020, suspicions arose between the parties regarding potential breaches of the agreement, leading to a series of letters in which the trading company accused the manufacturer of selling a competing product and threatened termination if the alleged breach was not cured. The manufacturer responded by denying any breach and, after further correspondence, declared the agreement terminated. The trading company agreed that the agreement was terminated, and both parties ceased their business relationship.The trading company then filed suit in the United States District Court for the Southern District of Texas, alleging antitrust violations, breach of contract, business disparagement, and misappropriation of trade secrets. The manufacturer counterclaimed for breach of contract and tortious interference. After a bench trial, the district court found in favor of the manufacturer on the breach of contract and trade secret claims, awarding over $1.3 million in damages. However, the court determined that the agreement was mutually terminated, not due to anticipatory repudiation by the trading company, and denied the manufacturer’s request for attorneys’ fees and prevailing party costs.On appeal, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s finding that the trading company did not commit anticipatory repudiation and that the agreement was mutually terminated. The Fifth Circuit also affirmed the denial of prevailing party costs under Rule 54(d) of the Federal Rules of Civil Procedure. However, the appellate court vacated the denial of attorneys’ fees under the agreement’s fee-shifting provision and remanded for further proceedings on that issue. View "Penthol v. Vertex Energy" on Justia Law

A Canadian corporation specializing in industrial heaters sought a new supplier and entered negotiations with a South Dakota manufacturer to custom-build 30 heaters. The parties initially agreed to the purchase and sale of 21 units, with a 20% down payment, and later extended the agreement to include the remaining nine units, for a total of 30 heaters at a set price per unit. The manufacturer began production and delivery as payments were made. However, after partial delivery and payment, the buyer stopped making payments, citing performance issues with the heaters and ultimately notified the manufacturer of its intent to terminate the relationship. Despite complaints about the heaters, the buyer did not reject or return any units but continued to accept and sell them until the manufacturer withheld further shipments due to nonpayment.The Circuit Court of the Fifth Judicial Circuit, Day County, South Dakota, granted summary judgment in favor of the manufacturer, finding that there was no genuine dispute of material fact regarding the existence of a contract for 30 heaters and that the buyer breached the agreement by failing to pay and by terminating the contract. The court also found that the manufacturer had taken reasonable steps to mitigate damages and that the buyer had not properly rejected the goods under the Uniform Commercial Code (UCC).On appeal, the Supreme Court of the State of South Dakota reviewed the case de novo. The Supreme Court held that there was no genuine issue of material fact regarding the existence of a contract for the sale of 30 heaters. However, the Court found that there were genuine issues of material fact as to whether the alleged defects in the heaters substantially impaired the value of the whole contract, which could excuse the buyer’s nonperformance under the UCC. The Supreme Court affirmed the lower court’s finding of contract formation, reversed the grant of summary judgment on the breach issue, and remanded for further proceedings. View "Anderson Industries v. Thermal Intelligence" on Justia Law

A group of employees at a wealth management firm in Richmond, Virginia, decided to leave their employer and establish a competing business. These employees, who had access to proprietary client information, had signed employment agreements with their former employer that included non-solicitation and confidentiality clauses. The agreements also addressed the industry-wide Protocol for Broker Recruiting, which generally allows departing financial advisors to take certain client information and solicit former clients if specific procedures are followed. However, the agreements stated that their terms would control over the Protocol in the event of any conflict. After resigning, the employees formed a new firm and began contacting their former clients, resulting in the loss of hundreds of accounts and significant assets for their previous employer.The United States District Court for the Eastern District of Virginia granted a preliminary injunction in favor of the former employer, barring the former employees and their new firm from contacting former clients or using confidential information. The district court found a strong likelihood of success on the merits of the trade secrets claims against all defendants, reasoning that even under the Protocol, the defendants’ conduct constituted impermissible “raiding.” The court also found that the employer would likely suffer irreparable harm and that the balance of equities and public interest favored injunctive relief.On appeal, the United States Court of Appeals for the Fourth Circuit reviewed the district court’s interpretation of the Protocol and the employment agreements. The Fourth Circuit held that the Protocol’s “raiding” exception applies only to actions by outside firms targeting another firm’s employees, not to employees leaving to form their own business. The court concluded that the employment agreements, not the Protocol, governed the former employees’ conduct and supported the injunction against them. However, because the new firm was not a party to those agreements, the injunction as to the new firm was vacated. Thus, the Fourth Circuit affirmed the injunction against the former employees but vacated it as to the new firm. View "Salomon & Ludwin, LLC v. Winters" on Justia Law

A medical device distributor sued a former employee, alleging that he breached a non-compete agreement, his duty of loyalty, and misappropriated trade secrets after joining a competitor. The employee responded with counterclaims and third-party claims. During the litigation, the employee filed for Chapter 7 bankruptcy, which stayed the district court proceedings. In the bankruptcy case, the distributor filed a proof of claim for damages, which the employee did not contest. The bankruptcy court allowed the claim, and the distributor received a partial distribution from the bankruptcy estate. The employee also waived his right to discharge, leaving him potentially liable for the remaining balance.After the bankruptcy case closed, the United States District Court for the District of Vermont lifted the stay. The distributor sought summary judgment for the balance of its allowed claim, arguing that the bankruptcy court’s allowance of its claim should have preclusive effect. Initially, the district court denied this request, finding that using claim preclusion offensively would be unfair. Upon reconsideration, however, the district court reversed itself and granted summary judgment to the distributor for the remaining balance, holding that claim preclusion applied.On appeal, the United States Court of Appeals for the Second Circuit reviewed the district court’s grant of summary judgment de novo. The Second Circuit held that, even if claim preclusion could sometimes be used offensively, it could not be applied in this case because it would be unfair to the employee, who had less incentive to contest the claim in bankruptcy. The court vacated the district court’s judgment in favor of the distributor and remanded the case for further proceedings. The main holding is that claim preclusion cannot be used offensively to secure a judgment for the balance of an allowed bankruptcy claim under these circumstances. View "Thermal Surgical, LLC v. Brown" on Justia Law

Several individuals formed a corporation, each contributing initial capital and later making additional cash contributions to meet the company’s needs. These later contributions were documented as promissory notes, including three notes issued to one founder, which were subsequently held by a trust after his death. The notes specified a 24-month term, a fixed interest rate, and repayment terms, but did not explicitly state they were payable on demand. After the founder’s death, the trust demanded payment on the notes, but the company refused, arguing the notes were not yet due, were actually capital contributions, or were subordinate to other shareholder loans.The District Court of Albany County dismissed claims by other shareholders seeking priority repayment, finding no justiciable controversy, and resolved the remaining issues on summary judgment. The court determined the notes were loans, not capital contributions, and that all founders’ notes should be repaid equitably if any were repaid. However, it found the notes were not immediately due and payable, as they lacked a demand provision, and denied the trust’s request for immediate payment. The court did award attorney fees to the trust under the terms of the notes.The Supreme Court of Wyoming reviewed the case and reversed the district court’s finding that the notes were not due and payable, holding that the notes matured after 24 months and were enforceable at that time. The court affirmed that the notes were loans, not capital contributions, and declined to give priority to other shareholder loans, finding no contractual basis for subordination. The court also affirmed the award of attorney fees to the trust and upheld the dismissal of the other shareholders’ claims for lack of a justiciable controversy. The case was remanded for entry of judgment in favor of the trust and determination of reasonable attorney fees and costs. View "King v. Sheesley" on Justia Law

Two companies, HBKY and Elk River, each claimed rights to thousands of acres of timber in Kentucky based on their respective contracts with a third party, Kingdom Energy Resources. Kingdom had entered into a timber sales contract with Elk River, allowing Elk River to cut and remove timber from certain land. Separately, Kingdom obtained a $22 million loan from a group of lenders, with HBKY acting as their agent, and mortgaged several properties—including the timber in question—as collateral for the loan. Kingdom later breached both agreements: it ousted Elk River from the land, violating the timber contract, and defaulted on the loan, leaving both HBKY and Elk River with competing claims to the timber.After HBKY secured a judgment in a New York federal court declaring Kingdom in default, it registered the judgment in the United States District Court for the Eastern District of Kentucky and initiated foreclosure proceedings on the collateral, including the timber. Elk River and its president, Robin Wilson, were joined as defendants due to their claimed interest. The district court granted summary judgment to HBKY, finding that Elk River did not obtain title to the timber under its contracts, did not have a superior interest, and was not a buyer in the ordinary course of business under Kentucky law.The United States Court of Appeals for the Sixth Circuit reviewed the case de novo. The court held that the loan documents did not authorize a sale of the timber free of HBKY’s security interest, as the mortgage explicitly stated that the security interest would survive any sale. The court also found that Elk River failed to provide sufficient evidence to establish its status as a buyer in the ordinary course of business. Accordingly, the Sixth Circuit affirmed the district court’s grant of summary judgment in favor of HBKY. View "HBKY, LLC v. Elk River Export, LLC" on Justia Law

The case involves a dispute between John B. Clinton, a former member and manager of CCP Equity Partners, LLC (CCP), and three other members and managers of CCP, Michael E. Aspinwall, Steven F. Piaker, and David W. Young. Clinton alleged that the defendants breached their contractual duties under CCP’s operating agreement by amending the agreement in 2008, removing him as a member in 2013, and maintaining an unnecessary $3 million capital reserve fund.The trial court, after a jury trial, found in favor of Clinton on his breach of contract claim, awarding him damages. The defendants appealed, arguing that the trial court incorrectly interpreted the second sentence of the duty of care provision in the operating agreement as imposing affirmative duties on them and improperly instructed the jury based on that interpretation. They also contended that the trial court abused its discretion by admitting the testimony of Clinton’s expert witness regarding the capital reserve fund.The Connecticut Supreme Court reviewed the case and agreed with the defendants that the trial court misinterpreted the second sentence of the duty of care provision, which is an exculpatory clause under Delaware law that limits liability rather than creating duties. The court found that the trial court’s jury instructions were incorrect and harmful, as they allowed the jury to find the defendants liable for acting in bad faith or with gross negligence or willful misconduct, which are not duties imposed by the agreement. The court also noted that the trial court improperly delegated the task of determining whether the contract provisions were ambiguous to the jury.The Connecticut Supreme Court reversed the trial court’s judgment and remanded the case for a new trial. The court also vacated the trial court’s awards of attorney’s fees, costs, and interest to Clinton. However, the court found no abuse of discretion in the trial court’s admission of the expert witness’s testimony regarding the capital reserve fund. View "Clinton v. Aspinwall" on Justia Law

Barbie Jean Schwinn and Deborah Schwinn Bailey filed a lawsuit against Robert Schwinn, TJ Schwinn, and Terry Ann Palazzo to wind up and terminate the Ignaz Schwinn Family Partnership Co. The district court found that the appellants wrongfully dissociated from the partnership, there were no grounds to terminate or wind up the partnership, and the appellants could no longer participate in the management of the partnership. The court granted the appellants a lien against the partnership’s assets for their interests, to be satisfied when the partnership eventually wound up.The district court held a bench trial and dismissed the appellants' claims for breach of contract, breach of fiduciary duty, and breach of the duty of good faith and fair dealing. The court also dismissed the appellants' claims to dissolve and wind up the partnership, finding it was a partnership for a definite term or particular undertaking under Illinois law. The court determined the appellants' dissociation was wrongful and that they were not entitled to payment for their interests until the completion of the undertaking. The court denied the appellees' other counterclaims.The Wyoming Supreme Court reviewed the case and found that the partnership was an at-will partnership, not one for a particular undertaking. The court held that the appellants' dissociation was not wrongful and that their withdrawal triggered the dissolution and winding up of the partnership under Section 801(1) of the Revised Uniform Partnership Act (RUPA). The court reversed the district court's decision and remanded the case for further proceedings to determine if the partnership agreement varied the RUPA's default rules and whether winding up was required under Section 801(5)(iii) due to a deadlock in management. The court also instructed the district court to determine if judicial supervision of the winding up was warranted. View "Schwinn v. Schwinn" on Justia Law