Justia Contracts Opinion Summaries

This matter involved a former presidential yacht whose owner (the LLC) and its sole member (together, Plaintiffs) co-induced Defendant by means of fraud to extend the owner a loan with the yacht as collateral. Under the operative loan documents, Defendant had the option to purchase up to a 100 percent interest in either the LLC or the yacht itself. Plaintiffs brought this case to enjoin Defendant from pursuing its rights in connection with the loan. Once the fraud came to light, Plaintiffs entered a stipulated order in default judgment (the judgment order). The judgment order provided that Defendant was entitled to exercise its rights under the loan documents, specifically including the option, and provided for the appointment of an independent counsel to determine outstanding current and potential liabilities of the LLC and the yacht. The judgment order retained the Court of Chancery’s jurisdiction to hear disputes arising out of the interpretation and enforcement of the order. The parties disagreed about the conclusions of the independent counsel concerning liabilities that may constitute liens against the LLC or the yacht. The Court of Chancery held (1) Defendant must exercise its option within sixty days of this letter opinion at the default option price as defined by the judgment order; and (2) the deduction for the liabilities used in reaching the default option price are as stated in the report of the independent counsel. View "Sequoia Presidential Yacht Group LLC v. FE Partners, LLC" on Justia Law

Northbound generates and sells life insurance leads, using the brand name “Leadbot,” but ran out of cash with a frozen line of credit and revenue that did not support its overhead. Norvax generates and sells health insurance leads. An asset purchase agreement was signed in 2009, “by and between” Northbound and Leadbot LLC, a subsidiary of Norvax that was formed to purchase the assets of Northbound. Under the agreement, Leadbot LLC was obligated to use the assets it acquired from Northbound in furtherance of the Leadbot brand. The purchase price was not paid in cash. Instead Northbound would receive an “earn-out” calculated as a percentage of the monthly net revenue of Leadbot LLC. The agreement also contained an Illinois choice-of-law clause. Northbound claims that Leadbot LLC and Norvax violated the agreement. The district court dismissed some claims and granted summary judgment for defendants on the remainder. The Seventh Circuit affirmed, reasoning that Norvax was not actually a party to the contract that was allegedly breached, nor is there any basis for holding Norvax liable for any breach by a subsidiary. View "Northbound Grp., Inc. v. Norvax, Inc." on Justia Law

Trovare sought to purchase an affiliated group of family-owned companies. The parties executed a Letter of Intent that included a provision requiring the companies, if they terminated negotiations in writing before a certain date, to pay Trovare a breakup fee of $200,000. Trovare demanded that fee more than a month before the termination date, claiming that the companies intentionally scuttled the deal before the termination date, and then engaged in sham “negotiations” to avoid paying the breakup fee. The companies never sent written notice of termination. Following a remand, the district court concluded and the Seventh Circuit affirmed that the companies had not terminated negotiations before the termination date, and that Trovare was therefore not entitled to the breakup fee. View "Trovare Capital Grp., LLC v. Simkins Indus., Inc." on Justia Law

Knickel approached Macquarie Bank about a loan to develop North Dakota oil and gas leases, providing confidential information about leased acreage that he had assembled over 10 years. Macquarie entered agreements with Knickel’s companies, LexMac and Novus. His other company, Lexar was not a party. Macquarie acquired a mortgage lien and perfected security interest in the leases and in their extensions or renewals. Royalties and confidential information—reserves reports on the acreage, seismic data, and geologic maps—also served as collateral. The companies defaulted. Because of the lack of development or production, many leases were set to expire. Knickel claims he agreed to renew only leases that included automatic extensions. Macquarie claims that Knickel promised to renew all leases serving as collateral in the names of LexMac and Novus. Upon the expiration of the leases without automatic extensions, Knickel entered into new leases in the name of Lexar, for development with LexMac and Novus, since they owned the confidential information. A foreclosure judgment entered, declaring that LexMac and Novus’s interest in the leases would be sold to satisfy the debt: $5,296,252.29,. Marquarie filed notice of lis pendens on Lexar’s leases, leased adjoining acreage, used the confidential information to find a buyer, and sold the leases at a profit of about $7,000,000. Marquarie filed claims of deceit, fraud, and promissory estoppel, and alleged that the corporate veil of the companies should be pierced to hold Knickel personally liable. The defendants counterclaimed misappropriation of trade secrets and unlawful interference with business. The Eighth Circuit affirmed summary judgment on all but one claim and judgment that Macquarie had misappropriated trade secrets. View "Macquarie Bank Ltd. v. Knickel" on Justia Law

In 2009, Paramount contracted with the RSAs, cellular-service providers: Paramount would provide billing services and the RSAs would pay Paramount $1.05 per month for each customer billed. The contract had an initial three-year term, with continual renewal for two-year terms, unless a party gave six months’ notice. The RSAs could end the agreement before the end of a term, but would have to pay Paramount “all projected monthly fees based on the number of unexpired months remaining on” the term. The contract did not guarantee a minimum number of billings, nor did it require the RSAs to use Paramount exclusively. In 2011, the RSAs sent Paramount a letter explaining that they were switching billing companies and would want assistance. The RSAs would “send an official notice … when [they] want[ed] the system shut down.” For a year, Paramount continued to serve the RSAs while helping them transfer records. Before the transfer was finished, the initial, three-year term ended, and the contract renewed. In 2013, the RSAs stopped using Paramount, with a year remaining on the renewed term. The RSAs sought a declaratory judgment, Paramount counterclaimed for breach of contract. The Eighth Circuit affirmed summary judgment in favor of Paramount, finding that the RSAs owe about $260,000 in liquidated damages. View "RSA 1 Ltd. P'ship v. Paramount Software Assocs." on Justia Law

Appellant, Stilwyn, Inc., brought suit against the Respondents stating nine claims for relief arising out of a failed transaction to purchase an interest in a loan. The district court dismissed those claims, holding that they were barred by prior federal litigation involving Stilwyn, two of the Respondents, and the same failed transaction. It held the claims were barred by claim preclusion and because the claims were compulsory counterclaims in the federal litigation that were not asserted there. Stilwyn argued on appeal to the Idaho Supreme Court that the district court erred in both respects. Respondents cross-appealed to argue that the district court erred in failing to grant their requests for attorney fees. Respondents also requested attorney fees on appeal. Upon review, the Supreme Court concluded: (1) the district court erred in its conclusion that Stilwyn's claims were barred by claim preclusion; (2) the district court erred in concluding that Stilwyn's claims were compulsory in the federal litigation; and (3) the district court did not err in refusing to grant attorney fees. View "Stilwyn, Inc. v. Rokan Corporation" on Justia Law

Employees of Instant, an information-technology staffing firm sign agreements in which they promise not to solicit business from Instant’s clients, not to recruit Instant’s employees to other jobs, and not to disclose the firm’s sensitive information to outsiders. DeFazio was Instant’s Vice President until 2012, when she was fired. She was already cofounding Connect, a new tech-staffing firm, and began working there immediately, along with several coworkers she persuaded to leave Instant. Connect won business from several of Instant’s recent clients. Instant sued DeFazio and others for breaching the restrictive covenants and under the Computer Fraud and Abuse Act, 18 U.S.C. 1030. DeFazio counterclaimed, alleging that Instant shortchanged her on a bonus. The court concluded that no one is liable to anyone else. The Seventh Circuit affirmed, agreeing that defendants did not leak or otherwise misuse Instant’s proprietary data. Defendants admitted breaching the covenants not to solicit and not to recruit, but in Illinois a restrictive covenant in an employment agreement is valid only if it serves a “legitimate business interest.” The district court concluded that neither covenant did. Tech-staffing firms do not build relationships with clients that would justify restricting their employees from setting out on their own. View "Instant Tech. LLC v. DeFazio" on Justia Law

VDF has trademark and patent rights in “CoffeeBerry” extract and licensed J&J to make and sell CoffeeBerry-based skin-care products. VDF was entitled to “running royalties,” based on the number of sales by the licensee, or by sublicensees. The license permitted J&J to sublicense its rights and required J&J to pay a minimum quarterly royalty if running royalties fell below a specified level. The license could not be assigned without written permission, but it did not forbid a change of control of J&J. J&J sublicensed Stiefel, a manufacturer of dermatological products. Four years later, J&J’s owners sold their interests to Stiefel for $8.5 million. J&J became a Stiefel subsidiary. After buying J&J’s stock, Stiefel engineered amended the sublicence, reducing the alternative minimum royalties that Stiefel owed J&J and diverting part of the license-revenue stream from VDF and J&J to Stiefel. VDF filed suit, alleging de facto assignment and breach of contract. The Seventh Circuit affirmed summary judgment in favor of the defendants with respect to claims that they engineered an unauthorized assignment of the license and that the $8.5 million paid for J&J was really a purchase of J&J’s anticipated sales revenue, so that part of that revenue should have gone to VDF as advance royalties. View "VDF Futureceuticals, Inc. v. Stiefel Labs, Inc." on Justia Law

In "Vinings Bank v. Brasfield & Gorrie, LLC," (759 SE2d 886 (2014)), the Court of Appeals affirmed, among other rulings, the trial court’s determination that Vinings Bank was not entitled to summary judgment with regard to a counterclaim for conversion brought against the Bank by Brasfield & Gorrie, LLC ("B&G"). This case stemmed from a defaulted $1.4 million business loan. The bank made the loan to Wagner Enterprises, Inc., which used as collateral, a security interest in all of its accounts and accounts receivable, including Wagner's contract to provide drywall services for general contractor B&G. Wagner defaulted on the loan, and the Bank filed suit against B&G seeking to collect on Wagner's accounts receivable. B&G counterclaimed for conversion, and the parties filed cross-motions for summary judgment. The bank appealed the denial of its motion. The Supreme Court affirmed in part, reversed in part, and remanded. In affirming the trial court's judgment, the Court of Appeals did not consider whether B&G had any right to assert a counterclaim against the bank for conversion of funds due to Wagner's subcontractors. The Supreme Court found that B&G had no direct relationship with the Bank, B&G was not, itself, a subcontractor of Wagner entitled to any of Wagner's funds, B&G did not have direct contractual relationships with any of Wagner's subcontractors, and B&G had no fiduciary relationship with any of Wagner's subcontractors. Furthermore, there was no evidence that Wagner or Wagner's affected subcontractors assigned B&G any of their rights. "Therefore, even if we assume without deciding that funds in [Wagner's] account were held in a constructive trust for the benefit of [Wagner's] subcontractors, B&G is not the party to assert those rights and had no standing to do so." View "Vinings Bank v. Brasfield & Gorrie, LLC" on Justia Law

Wild is the sole member of Braveheart, LLC, which is one of two members of another limited liability company, Catalyst. In 2008, Catalyst borrowed $500,000 from Laurus. Wild signed a personal guaranty as security for Catalyst's loan. The guaranty did not expressly extend Wild's promise to Laurus's "successors and assigns," but it also did not expressly prohibit assignment of the guaranty. Years later, Laurus assigned the Catalyst promissory note to Avnet as part of a forbearance agreement on a debt Laurus owed to Avnet. An attorney for Avnet contacted Catalyst demanding payment of the $500,000 loan plus interest. When Catalyst did not make any payments, Avnet's attorney contacted Wild and demanded that he honor his personal guaranty. When Wild did not honor the guaranty, Avnet filed suit. Catalyst did not respond; a $770,065.80 default judgment entered against the company. Wild contended his guaranty was a "special guaranty" (directed solely to a specific creditor) rather than a "general guaranty" and that a special guaranty could not be assigned under Iowa law. After examining Iowa law, the district court determined the Iowa Supreme Court would allow enforcement of Wild's personal guaranty by Avnet. The Eighth Circuit affirmed. View "Avnet, Inc. v. Wild" on Justia Law