Justia Contracts Opinion Summaries

Dahyalal Patel filed an action seeking to enforce his ownership rights as a shareholder in Subway No. 43092, Inc. ("the corporation"), against shareholder Ashish Shah ("Shah"), Shah's father, Ramesh Shah ("Ramesh"); and the corporation (collectively,"the Shah defendants"). In 2007, Shah, the owner of eight Subway restaurants in and around Madison County, Alabama, prepared to open a ninth Subway restaurant in Huntsville ("the restaurant"). In July 2008, Shah formed the corporation for the purposes of owning and operating the restaurant. Shah owned 90 percent of the stock of the corporation and Ramesh owned 10 percent. In 2008, Patel met with Shah about Shah's plan to open the restaurant. At some point, Patel and Shah orally agreed that Patel would purchase a 25 percent ownership interest in the corporation. Because Shah estimated that start-up costs for the restaurant would be $240,000, Patel agreed to purchase a 25 percent interest in the corporation for $60,000, payable in monthly installments. After the restaurant opened in December 2008, Shah began making periodic distributions of profits to Patel. Patel eventually paid back the $60,000, and agreed to pay an additional $12,000 for an additional five percent interest. In September 2012, Patel sued the Shah defendants, alleging that Shah had misrepresented the start-up costs for the restaurant in calculating the price of Patel's 25 percent interest. Patel alleged that the actual start-up costs were $140,000 rather than $240,000, as Shah had represented. Accordingly, Patel alleged that he either overpaid for his interest or acquired more than a 50 percent interest in the corporation. Patel further alleged that the distributions of profits he received were not proportional to his interest, even assuming that his interest was 30 percent. In addition, he claimed that Shah had withheld Patel's share of franchise-sales commissions that the corporation received from its franchisor. The Shah defendants raised a number of defenses, among them, statute of frauds and statute of limitations. The trial court granted the Shaw defendants' motion for summary judgment, effectively dismissing Patel's claims. After review, the Alabama Supreme Court affirmed summary judgment in favor of the Shah defendants on Patel's tort claims, other than conversion, and on Patel's conversion claim insofar as Patel alleged conversion of profits, commissions, and his ownership interest in the corporation. The Court reversed the summary judgment on Patel's breach-of-contract and unjust-enrichment claims and on his conversion claim insofar as Patel alleged the conversion of corporate property. This case was remanded for further proceedings. View "Patel v. Shah" on Justia Law

Federico Garcia, president of Mama Kio’s, entered into an agreement with Total Merchant Services (TMS) for credit-card financial services for the restaurant. Two months after opening Mama Kio’s, Garcia noticed that the bank deposits through TMS were considerably less than expected. TMS later discovered the cause was an improper code in its software that had failed to collect the tips authorized by the customers. The missing tips totaled approximately $14,000. TMS attempted to remedy the error by running the credit cards again for the uncharged tip amounts. However, the customers were charged not only for the uncollected tips but also for the entire charged amounts. More than three thousand customers’ transactions were double and/or triple billed, resulting in more than $400,000 taken from Mama Kio’s customers’ accounts. Mama Kio’s worked with the credit-card companies for more than a month to repair and mitigate the damages. Mama Kio’s was forced to close its restaurant for lack of customers. LAGB, LLC, a commercial landlord, filed suit against Mama Kio’s for breach of its lease contract and sought damages for rent, insurance, taxes, and capital improvements. LAGB also sued the companies that provided credit-card processing services to Mama Kio’s, alleging that the negligence of the credit-card processing companies caused Mama Kio’s to breach its lease with LAGB. Mama Kio’s filed a cross-claim against the credit-card processing companies, alleging misrepresentations and tortious interference with its business. The credit-card processing companies filed motions compelling LAGB and Mama Kio’s to arbitrate. The trial court granted the motions. The Mississippi Supreme Court determined that while the trial court did not err by compelling Mama Kio’s to arbitrate its cross-claims, it did err by compelling LAGB to arbitrate its claims. View "LAGB, LLC v. Total Merchant Services, Inc." on Justia Law

TSG Real Estate, LLC (“TSG”) was a real estate company that owned a commercial property in Montgomery County, Pennsylvania (the “Property”). Initially, TSG hired New Hart Corporation d/b/a Hart Corporation (“Hart”) as its broker to market the Property. As TSG’s agreement with Hart was to expire, TSG began considering replacement brokers, one of which was Binswanger of Pennsylvania, Inc. (“Binswanger”). Two days before TSG informed Binswanger of its decision to hire it as its broker, TSG received a written offer from TWA Holdings, LLC (“TWA”) to purchase the Property for $3.7 million. TSG negotiated an agreement with Binswanger culminating in a September 27, 2013 “Exclusive Right To Sell Or Lease Agreement” (“Broker Agreement”) with Binswanger. The Broker Agreement permitted TSG to continue using other brokers in connection with any sale to TWA, and provided, inter alia, (1) if Binswanger sold the Property, it would be entitled to a 5% commission; (2) all commissions would be considered to be earned and payable “at the time scheduled for closing on a sale;” (3) a “carve-out period” which allowed that if another broker “completed” a sale, exchange, or transfer of the Property to TWA on or before January 5, 2014, Binswanger would earn no commission; (4) if another broker completed a sale of the Property to TWA after January 5, 2014, the other broker and Binswanger would split a 5% commission; and (5) the duration of the agreement was for one year; however, TSG had the right to terminate the agreement after 6 months with 30 days prior written notice to Binswanger. Two days prior to the expiration of the carve-out period contained in the Broker Agreement, TSG, via Hart and another broker, Gelcor Realty (“Gelcor”), entered into an Agreement of Sale with TWA, selling the Property for $3.4 million. In this appeal by allowance, the Pennsylvania Supreme Court considered the entitlement to broker commissions for the sale of commercial property. Applying the plain and unambiguous language of the Broker Agreement, the Supreme Court found the sale of the Property was completed at the time of closing, i.e., on April 24, 2014. As the sale was not completed on or before January 5, 2014, but only after the carve-out period had expired, Binswanger was entitled to a commission pursuant to the Broker Agreement fee schedule. View "Binswanger of PA Inc v. TSG Real Estate LLC." on Justia Law

In 2008, Appellants, Gamesa Energy USA, LLC and Gamesa Technology Corporation, Inc. (Gamesa), entered into a commercial lease agreement (the Lease) to rent 35,000 square feet of office space in Philadelphia (the Premises) from Appellees, Ten Penn Center Associates, L.P. and SAP V Ten Penn Center NF G.P. L.L.C. (collectively Ten Penn Center). In May 2011, following Gamesa’s submission of the information required under Article 20.2 of the Lease, Ten Penn Center approved a request to sublease approximately 15,000 square feet, or forty percent of the Premises, to Viridity Energy, Inc. (Viridity) through August of 2018. In April 2012, Gamesa informed Ten Penn Center it would be moving out of the Premises as part of a corporate consolidation, and would continue to pay its monthly rent and attempt to find a sub-lessee for the open space. Viridity remained in the Premises under the terms of its sublease with Gamesa. Gamesa was twice late with the rent after it moved out, but still paid amounts due. In 2012, Gamesa submitted a request to Ten Penn Center for consent to sublease 5,200 square feet of the Premises to Business Services International, LLC (BSI), a business entity comprised of two foreign corporations formed for the particular purpose of subleasing office space through Gamesa. Ten Penn Center responded on June 26th, informing Gamesa it was in default of the Lease for vacating the Premises and, as a result, Ten Penn Center had no obligation to entertain the request to sublease. Ten Penn Center proposed it would grant consent to the BSI sublease if Gamesa forfeited its remaining tenant improvement allowance. Thereafter, negotiations between the parties stalled, and the proposed sublease with BSI never materialized. In 2013, Gamesa filed a complaint against Ten Penn Center, asserting claims of breach of contract, tortious interference in business relationships, and unjust enrichment. The Pennsylvania Supreme Court granted discretionary review of this commercial landlord and tenant dispute to determine whether the Superior Court erred in holding the tenant was limited to damages for breach of contract and could not also recover the rent it paid following the landlord’s breach, despite prevailing on its claims for both remedies at trial. After careful review, the Supreme Court found no reversible error and affirmed the Superior Court. View "Gamesa Energy USA, Aplt. v. Ten Penn Center, et al" on Justia Law

The federal district court for the Western District of Washington certified a question of state law to the Washington Supreme Court. Money Mailer, LLC and Wade Brewer entered into a franchisor/franchisee relationship. In 2015, Money Mailer sued Brewer alleging breach of contract and for nearly $2 million in damages. Brewer counterclaimed, arguing among other things that Money Mailer violated the Franchise Investment Protection Act (FIPA) by selling him "products and services ... at more than a fair and reasonable price," contrary to RCW 19.100.180(2)(d). Brewer moved for partial summary judgment on the alleged FIPA violation. The district court found undisputed Money Mailer sold printed advertisements to Brewer at twice the price at which Money Mailer obtained and/or produced them. The court determined this markup violated RCW 19.100.180(2)(d) as a matter of law, and on this ground, granted in part Brewer's motion. In concluding Money Mailer's behavior violated the FIPA, the district court relied on two conclusions regarding Washington law: (1) the Court impliedly found that a franchisee may generally rely on the price at which a franchisor purchased a particular good or service to show what the "fair and reasonable price" for that service is; and (2) that selling a franchisee a particular good or service for twice what it cost the franchisor was not a "fair and reasonable price" and violated FlPA as a matter of Washington law. The federal court certified those conclusions as questions, asking the Washington Supreme Court to clarify whether those two rules of law were correct. After review, the Supreme Court answered "no" to both. A "fair and reasonable price" in RCW 19.100.180(2)(d) was a question of fact involving what prudent franchisors and franchisees in similar circumstances would regard as an appropriate price. "The circumstances must take into account the forces of the marked...whether Money Mailer violated the FIPA remains a question of fact to be determined by the district court." View "Money Mailer, LLC v. Brewer" on Justia Law

Plaintiffs purchased a recreational vehicle (RV) from Vacationland for $26,000.25. When it leaked during a rainstorm, they brought it in for repair. When it leaked again, causing extensive damage, they brought it back. A little more than two weeks after they dropped it off the second time and without a timetable for when the vehicle would be repaired, they told the seller that they no longer wanted the RV and asked for their money back. Plaintiffs sued, citing revocation of acceptance under the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, 15 U.S.C. 2310(d); breach of implied warranty of merchantability under the Magnuson-Moss Act; revocation of acceptance and cancellation of contract under Illinois’s adoption of the Uniform Commercial Code; and return of purchase price under the UCC. Defendant argued that plaintiffs’ failure to give it a reasonable opportunity to cure was fatal to their claims. The circuit court granted the defendant summary judgment. The appellate court affirmed. Plaintiffs sought review of the revocation of acceptance claim under the UCC (810 ILCS 5/2- 608(1)(b)). The Illinois Supreme Court reversed. The plain language of subsection 2-608(1)(b) does not require that the buyer give the seller an opportunity to cure a substantial nonconformity before revoking acceptance. View "Accettura v. Vacationland, Inc." on Justia Law

For the 100th Indianapolis 500 race in 2016, organizers engaged Karma, an event-planning company, to host a ticketed party. The party was a disappointment. Poor ticket sales prevented Karma from covering its expenses. Karma sued the racetrack for breach of contract, accusing it of failing to adequately promote the party. Karma sought $817,500 in damages, a figure apparently gleaned from conversations with Speedway officials who speculated that the party would generate $1 million in gross revenue “from ticket and table sales only.” The Speedway filed a counterclaim alleging that Karma failed to place the promised banner advertisement on Maxim’s website or provide marketing support on Maxim’s social-media channels. Karma is a licensee of Maxim’s, a men’s magazine. The district judge rejected Karma’s claim at summary judgment, ruling that the damages theory rested on speculation. A jury found Karma liable on the counterclaim, awarding $75,000 in damages. The Seventh Circuit affirmed. Karma’s evidence of damages was speculative, so its claim failed under Indiana law. The jury could award objectively foreseeable damages; it didn’t need to hear testimony on the subjective expectations of Speedway officials before awarding damages. View "Karma International, LLC v. Indianapolis Motor Speedway, LLC" on Justia Law

LS, a trucking company, also operates as a broker of construction trucking services. Under a 2009 oral agreement between LS and Cheema, Cheema purchased a Super Dump Truck, with the understanding that LS would purchase the truck’s detachable box from Cheema. As the box owner, LS would give priority to Cheema in dispatching assignments to Cheema as a subhauler. The parties entered a written “Subhauler and Trailer Rental Agreement” under which Cheema would submit to LS completed freight bills for all hauling that he performed for LS; LS would prepare statements showing the amount billed payable to Cheema, less a 7.5 percent brokerage fee and, if the work was performed with a box owned by LS, a 17.5 percent rental fee. Cheema began providing hauling services. Cheema claimed that because LS failed to pay him the $32,835.09 purchase price of the box, it remained his, and LS was not entitled to deduct rental fees from the payments due him. In June 2010, LS began paying Cheema $1,000 a month for nine months, noting on the checks that the payments were repayment of a “loan.” Cheema recovered damages from L.S. for having been underpaid and untimely payments. The court of appeal affirmed but remanded for calculation of prejudgment interest and penalty interest (Civil Code 3287, 3322.1), rejecting LS’s argument that the parties’ oral agreement for Cheema to sell it the box, justifying its deductions for rental, was enforceable. View "Cheema v. L.S. Trucking, Inc." on Justia Law

Sapa manufactures aluminum extruded profiles, pre-treats the metal and coats it with primer and topcoat. For decades, Sapa supplied “organically coated extruded aluminum profiles” to Marvin, which incorporated these extrusions with other materials to manufacture aluminum-clad windows and doors. This process was permanent, so if an extrusion was defective, it could not be swapped out; the whole window or door had to be replaced. In 2000-2010, Marvin bought about 28 million Sapa extrusions and incorporated them in about 8.5 million windows and doors. Marvin sometimes received complaints that the aluminum parts of its windows and doors would oxidize or corrode. The companies initially worked together to resolve the issues. In the mid-2000s, there was an increase in complaints, mostly from people who lived close to the ocean. In 2010, Marvin sued Sapa, alleging that Sapa had sold it extrusions that failed to meet Marvin’s specifications. In 2013, the companies settled their dispute for a large sum.Throughout the relevant period, Sapa maintained 28 commercial general liability insurance policies through eight carriers. Zurich accepted the defense under a reservation of rights, but the Insurers disclaimed coverage. Sapa sued them, asserting breach of contract. The district court held that Marvin’s claims were not an “occurrence” that triggered coverage. The Third Circuit vacated in part, citing Pennsylvania insurance law: whether a manufacturer may recover from its liability insurers the cost of settling a lawsuit alleging that the manufacturer’s product was defective turns on the language of the specific policies. Nineteen policies, containing an Accident Definition of “occurrence,” do not cover Marvin’s allegations, which are solely for faulty workmanship. Seven policies contain an Expected/Intended Definition that triggers a subjective-intent standard that must be considered on remand. Two policies with an Injurious Exposure Definition also include the Insured’s Intent Clause and require further consideration. View "Sapa Extrusions, Inc. v. Liberty Mutual Insurance Co." on Justia Law

Parke Bancorp (“Parke”) made a loan to 659 Chestnut LLC (“659 Chestnut”) in 2016 to finance the construction of an office building in Newark, Delaware. 659 Chestnut pleaded a claim in the Superior Court for money damages in the amount of a 1% prepayment penalty it had paid under protest when it paid off the loan. The basis of 659 Chestnut’s claim was that the parties were mutually mistaken as to the prepayment penalty provisions of the relevant loan documents. Parke counterclaimed for money damages in the amount of a 5% prepayment penalty, which it claimed was provided for in the agreement. After a bench trial, the Superior Court agreed with 659 Chestnut and entered judgment in its favor. After review, the Delaware Supreme Court reversed and directed entry of judgment in Parke’s favor on 659 Chestnut’s claim. Although Parke loan officer Timothy Cole negotiated on behalf of Parke and represented to 659 Chestnut during negotiations that there was a no-penalty window, the parties stipulated that: (1) everyone knew that Cole did not have authority to bind Parke to loan terms; and (2) everyone also knew that any terms proposed by Cole required both final documentation and approval by Parke’s loan committee. It was evident to the Supreme Court that 659 Chestnut did not offer clear and convincing evidence that Parke’s loan committee agreed to something other than the terms in the final loan documents. Accordingly, it Directed entry of judgment for Parke. View "Parke Bancorp Inc., et al. v. 659 Chestnut LLC" on Justia Law