Justia Contracts Opinion Summaries

In 2002, Deere became the exclusive North American wholesale supplier of Hitachi products. In 2014, Deere notified Rudd, a long-time authorized dealer of Hitachi equipment, of its intent to terminate its dealer agreements and initiated arbitration proceedings, as required by the agreement. Although Rudd agreed that arbitration was the proper forum, it sought injunctive relief to maintain the status quo during arbitration and moved to seal the case, stating that “the very fact of this lawsuit” could cause loss of customers, layoffs (or preemptive departure) of employees, and diminution of the value of Rudd’s financial investment. Two weeks later, the district court entered Rudd's proposed order, before Deere submitted a response. During an on-the-record telephonic status conference, the court asked the parties whether the case should remain under seal; Rudd’s counsel replied that it should, while Deere’s counsel was silent. The matter proceeded to an Agreed Order. The arbitration panel requested a copy of that Order, believing that it would obviate the need for an expedited hearing. Deere’s counsel forwarded the Order without consulting Rudd. Rudd moved for contempt . Deere moved to vacate the sealing order. The Sixth Circuit affirmed an order unsealing the case. Rudd cannot show any countervailing privacy interest sufficient to outweigh the strong presumption in favor of public access to federal court records View "Rudd Equip. Co., Inc. v. John Deere Constr. & Forestry Co." on Justia Law

In 1995, Jazz Photo Corp., one of several commercial entities (collectively referred to as the Jazz Entities), entered into a factoring agreement with Rosenthal & Rosenthal, Inc. Jazz Photo sold Rosenthal its accounts receivable in return for cash. Five years later, Vanessa Benun, the daughter of Jack Benun, a principal of the Jazz Entities, guaranteed Jazz Photo's obligations under that agreement. At that time, Benun also executed a mortgage on real property she owned in Monmouth County as security for her personal guaranty. In March 2005, another of the Jazz Entities, Ribi Tech Products, LLC entered into a factoring agreement with Rosenthal. Benun personally guaranteed Ribi Tech's obligations to Rosenthal. In March 2007, Riker, Danzig, Scherer, Hyland & Perretti, L.L.P. (Riker), a law firm providing legal services to Jack Benun and the Jazz Entities, obtained a third mortgage from Benun on the same real property. This mortgage was executed in favor of Riker to secure Jack Benun's personal debt under a letter agreement. When Benun executed the mortgage, Jack Benun owed Riker $1,679,701.33 in unpaid legal fees, and the letter agreement reflected his obligations to Riker and Riker's promise to provide continuing legal representation. Riker's mortgage was recorded on April 13, 2007. Rosenthal received actual notice of the Riker mortgage in August 2007. Despite notice of the Riker mortgage, Rosenthal continued to make advances to the Jazz Entities that totaled millions of dollars. In September 2009, Jazz Products filed for bankruptcy. The Jazz Entities defaulted on their obligations to Rosenthal, owing Rosenthal close to $4 million. Benun, in turn, defaulted on her personal guaranty to secure the debt. After Riker recorded its mortgage on the Monmouth County property, it continued to perform legal services for Jack Benun, and his unpaid legal fees ballooned to over $3 million. Jack Benun, and the Jazz Entities defaulted on their obligation to Riker and Benun defaulted on her guaranty. Rosenthal filed a foreclosure complaint against Benun, her husband, and Riker. Benun and her husband did not respond, and Rosenthal requested that a default judgment be entered against them. Riker answered, disputing the priority of Rosenthal's mortgages. Later, both Rosenthal and Riker filed cross-motions for summary judgment regarding the priority of their respective mortgages. The trial court granted Rosenthal's motion, determining that the dragnet clauses in the Rosenthal mortgages were fully enforceable. With regard to priority, the trial court held that Riker's argument that its mortgage displaced the two Rosenthal mortgages was legally flawed because the firm accepted a mortgage on the property with knowledge of two prior mortgages, each securing an obligation of up to $1 million, and with knowledge of the anti-subordination clauses. The court concluded that there was no convincing justification for rewarding Riker a superior priority. Riker appealed, and the Appellate Division reversed. The Supreme Court affirmed the Appellate Division, finding that Rosenthal had advance notice of the law firm's intervening lien but nonetheless proceeded to make optional advances to the commercial entities. "Having done so, its mortgages securing those optional future advances were subordinated to the law firm's intervening lien." View "Rosenthal & Rosenthal, Inc. v. Benun" on Justia Law

CEEG (Shanghai) Solar Science & Technology Co., Ltd. (“CEEG”), a Chinese company, agreed to sell solar energy products to LUMOS, LLC, a U.S. company. After receiving certain shipments, LUMOS filed a warranty claim alleging workmanship defects, and refused to remit the balance due. After two years of "fitful" negotiations, CEEG filed an arbitration proceeding pursuant to the parties’ agreements. Although the parties had communicated exclusively in English to that point, CEEG served LUMOS with a Chinese-language notice of the proceedings, and LUMOS did not immediately realize what the notice was. After the arbitration panel ruled in its favor, CEEG moved for the district court to confirm the award. LUMOS filed a motion to dismiss, arguing that the Chinese-language notice caused it to miss the deadline to participate in appointing the arbitration panel. The district court granted the motion, finding that the notice was not reasonably calculated to apprise LUMOS of the arbitration proceedings. The Tenth Circuit agreed and affirmed. View "CEEG (Shanghai) Solar Science v. Lumos" on Justia Law

Patricia Cornwell, a well-known crime novelist, and her spouse filed suit against their former business managers Anchin Block & Anchin and the company’s principal, Evan Snapper, alleging New York state law claims of negligent performance of professional services, breach of contract, and breach of fiduciary duty. The jury returned a verdict in favor of Plaintiffs on all three claims and awarded Plaintiffs $51 million in damages. Thereafter, the district court vacated the jury’s decision, ruling that it had incorrectly instructed the jury and that Defendants’ statements to the Department of Justice (DOJ) were protected by a qualified privilege and therefore should not have been considered by the jury. The First Circuit reversed in part, holding (1) the district court correctly found that it incorrectly instructed the jury on New York’s statute of limitations for a breach of fiduciary duty claim; and (2) the district court erred in entering judgment as a matter of law for Defendants on the DOJ issue. Remanded for a new trial. View "Cornwell Ent., Inc. v. Anchin, Block & Anchin, LLP" on Justia Law

In 2007, plaintiff Innovation Ventures, LLC engaged defendants Andrew Krause and K & L Development of Michigan (K & L Development) to design, manufacture, and install manufacturing and packaging equipment for the production of "5-Hour ENERGY" at Liquid Manufacturing’s bottling plant. The issue this case presented for the Michigan Supreme Court's review centered on whether agreements between sophisticated businesses were void for failure of consideration and whether the noncompete provisions in these agreements were reasonable. Innovation Ventures alleged a variety of tort and breach of contract claims against Liquid Manufacturing, LLC, K & L Development of Michigan, LLC, Eternal Energy, LLC, LXR Biotech, LLC, Peter Paisley, and Andrew Krause based on the defendants’ production of Eternal Energy and other energy drinks. Contrary to the determination of the Court of Appeals, the Supreme Court concluded that the parties’ Equipment Manufacturing and Installation Agreement (EMI) and Nondisclosure Agreement were not void for failure of consideration. The Court nevertheless affirmed the trial court’s grant of summary judgment to defendants for the claims against Krause, because there was no genuine issue of material fact on the question whether Krause breached the EMI or the Nondisclosure Agreement. Likewise, there was no issue on the question whether K & L Development breached the EMI. The Court concluded the Court of Appeals erred in failing to evaluate the noncompete provision in the parties’ Termination Agreement for reasonableness. The Court therefore reversed in part, affirmed in part, and remanded for consideration of those questions of fact remaining regarding whether K & L Development breached the Nondisclosure Agreement and whether Liquid Manufacturing breached the Termination Agreement with respect to its production of products other than Eternal Energy. View "Innovation Ventures, LLC v. Liquid Manufacturing, LLC" on Justia Law

This case concerns a lease and a purported joint venture agreement entered into between defendant and his now-deceased father, the former president and majority shareholder of a real estate development corporation. The lease granted defendant control over a multi-million-dollar property for a period of 20 years in exchange for a payment of $20. AHC sought damages for defendant's use and occupancy of the property and a judgment declaring the lease and joint venture agreement void. Defendant counterclaimed. The district court granted AHC’s motion for partial summary judgment on its declaratory judgment claims and denied defendant's requests for additional discovery. The court concluded that the district court did not abuse its discretion in denying defendant's FRCP 56(d) motion seeking more discovery materials where none of the items defendant specifically requested is germane to the issues before the court; the court applied Pennsylvania law to its analysis of the joint‐venture dispute and New York law to the lease dispute; and the district court correctly concluded that the business judgment rule should not apply to the lease and thus the lease was void as a gift or act of corporate waste. As to the joint venture agreement, the court declined to certify the issue of parol evidence to the state court. The court concluded that the parol evidence rule applies in this case and that the integration clause in the lease retains its preclusive effect. Accordingly, the court affirmed the judgment. View "Alphonse Hotel Corp. v. Tran" on Justia Law

Caudill, the owner of a real estate brokerage, sued Keller Williams for breach of a 2001 franchise contract. Caudill's position as Regional Director of Keller Williams was terminated in 2010; her franchise was terminated in 2011. The suit settled with an agreement including a prohibition against disclosure of its terms, except to tax professionals, insurance carriers, and government agencies; those recipients had to promise to keep them in confidence. Any violation entitled the victim to damages of $10,000. Months later, Keller Williams issued an FDD (Franchise Disclosure Document) to about 2000 existing or potential franchisees and other parties, describing Caudill’s lawsuit in detail. The FDD was not required by the Federal Trade Commission under 16 C.F.R. 436.2(a). Caudill sought $20 million (2000 x $10,000) in damages. The district judge rejected her claim, noting that under Texas law a liquidated damages clause is enforceable only if “the harm caused by the breach is incapable or difficult of estimation and … the [specified] amount of liquidated damages is a reasonable forecast of just compensation.” The Seventh Circuit affirmed. It is unreasonable to suppose, without evidence, that the dissemination of the FDD caused Caudill a $20 million loss. Although the burden of proving that a liquidated damages clause is actually a penalty clause is on the defendant, Keller Williams established that there was no basis for the requested damages. View "Caudill v. Keller Williams Realty, Inc." on Justia Law

Under Ohio Rev. Code 1333.85, suppliers manufacture or import alcoholic beverages and must sell their products to state-licensed distributors, who sell to retailers; supplier-distributor franchise agreements are protected from termination without just cause, except when a successor manufacturer acquires another manufacturer, the successor may terminate the franchise by repurchasing the distributor’s inventory and compensating for the diminished value of the distributor’s business that is directly related to the sale of the product terminated. NAB owned Labatt through nested holding companies. NAB's owners sold their interests to CCR. Months later, Ohio distributors of the Labatt brands received letters terminating their franchises, citing the section 1333.85(D) exception. In the distributors' suit, the court granted CCR summary judgment on a Takings Clause claim and a claim regarding the scope of section 1333.85(D), then determined the diminution of the values of the distributors. The Sixth Circuit affirmed rejection of the constitutional claims. At common law, businesses may enter into contracts that allow for termination and contracting parties have a right to breach a contract that is no longer advantageous, in an “efficient breach.” That common-law norm is abrogated by section 1333.85, with an exception. The state created and is free to take away that protection from termination. The court remanded the calculation of damages with instructions to deduct the distributors' projected profits for the time until the date when the franchise agreements are finally terminated View "Tri County Wholesale Distrib., Inc. v. Labatt USA Operating Co." on Justia Law

John Kugler appealed the grant of summary judgment in his suit against Ron Nelson, David Powers, Steven Kenison, William Armstrong, and Powers Candy Co., Inc. (collectively “the Defendants”). Until mid-2010, Kugler, Nelson, Powers, Kenison, and Armstrong were all shareholders of H & M Distributing, Inc. (H & M), a wholesale distributor of beverages, cigarettes, and other miscellaneous items. In his complaint, Kugler alleged breach of various agreements and wrongful actions taken by the Defendants all in relation to Nelson's departure from H & M. The district court dismissed all of Kugler’s claims because it found that the claims were derivative and Kugler failed to comply with derivative action requirements. Finding no reversible error, the Supreme Court affirmed. View "Kugler v. Nelson" on Justia Law

Petitioner John Van Rees, Sr. contracted with respondent Unleaded Software, Inc. to perform web-related services and to design additional websites. After Unleaded missed deadlines and failed to deliver the promised services, Van Rees sued, asserting multiple tort claims, a civil theft claim, three breach of contract claims, and a claim for violations of the Colorado Consumer Protection Act (CCPA). The trial court granted Unleaded's 12(b)(5) motion, dismissing all but Van Rees' contract claims, on which a jury found in Van Rees' favor. Van Rees appealed, and the court of appeals affirmed. After its review, the Colorado Supreme Court affirmed in part and reversed in part. The appellate court had determined that the tort and civil theft claims were barred by the "economic loss rule" because they were related to promises memorialized in the contracts, and the CCPA claim failed to allege a significant public impact. The Supreme Court found the issue pertaining to the economic loss rule was not whether the tort claims related to a contract, but whether they stemmed from a duty independent of the contact. The Court found pre-contractural misrepresentations in this case distinct from the contract itself, and could have formed the basis of an independent tort claim. Accordingly, the Court reversed as to Van Rees' tort claims. With respect to civil theft, the court affirmed the court of appeals on the ground that the claim failed to adequately allege the "knowing deprivation of a thing of value." View "Van Rees v. Unleaded Software, Inc." on Justia Law