Justia Contracts Opinion Summaries

Noatex Corp. and Kohn Law Group, Inc. appealed two district court decisions in an interpleader action brought by Auto Parts Manufacturing Mississippi, Inc. (“APMM”) that named Noatex, King Construction of Houston, L.L.C., and Kohn as claimants. Appellants claimed that the district court erred in discharging APMM from the action, enjoining all parties from filing any proceedings relating to the interpleader fund without a court order, and in denying their motion to compel arbitration. After careful consideration of the trial court record, the Fifth circuit found no reversible error and affirmed the discharge of APMM and its accompanying injunction, the denial of appellants' motion to compel arbitration and to stay proceedings pending arbitration. King Construction was dismissed from these appeals, and appellants' alternative motion to vacate the trial court's rulings was denied. View "Auto Parts Mfg MS, Inc. v. King Const of Houston,LLC" on Justia Law

Plaintiffs were four Delaware-domiciled captive insurance companies. The State Insurance Commissioner prosecuted their claims as their receiver in liquidation, alleging fraudulent conduct on the part of the companies’ president, breach of fiduciary duty on the part of the other directors of the corporation, and, as to the companies’ auditors and their administrative management company, aiding and abetting breaches of fiduciary duty, breach of contract, and negligence. The Court of Chancery dismissed in part the claims against the auditors and their company, holding (1) the doctrine of in pari delicto applies in this case and effectively bars the relevant claims against those defendants; (2) Plaintiffs’ claims for breach of contract and negligence are dismissed on grounds of in pari delicto, but the fiduciary duty exception to in pari delicto covers Plaintiffs’ claims for aiding and abetting a breach of fiduciary duty; and (3) Plaintiffs’ motion to dismiss their claims for aiding and abetting against each of the auditors and the administrative management company is denied, except as they relate to the auditor that was retained second. View "Hon. Karen Stewart v. Wilmington Trust SP Servs., Inc." on Justia Law

Menard operated a store in a building subleased from Wal-Mart. In 2006, Menard entered into a Purchase Agreement (PA) with Dial; Clauff signed as a managing member of Dial. Menard planned to build a store and wanted to be relieved of its obligations under the sublease. Menard and Dial agreed that Dial would assume responsibility for the sublease after Menard opened its new store. With Wal-Mart’s consent, DKC (Chauff's other LLC) and Menard executed an Assignment. Clauff purported to sign as a member of DKC. DKC did not file Articles of Organization until later. Clauff and Menard claim, but neither provided evidence, that DKC adopted the Assignment after the company formed. Menard remained secondarily liable. Menard opened its new store in 2008. When the Sublease expired in 2011, Wal-Mart was owed more than $700,000. Menard paid $350,000 and sued Dial, DKC, and Clauff. The district court granted summary judgment, finding Clauff liable under Nebraska Revised Statute 21-2635: "[a]ll persons who assume to act as a limited liability company without authority to do so shall be jointly and severally liable for all debts and liabilities of the company." The Eighth Circuit reversed for determination of whether common law or section 21-2635 preclude Clauff's argument that his liability may be avoided because DKC adopted the contract and commenced performance. View "Menard, Inc. v. Clauff" on Justia Law

In this case, the buyer persuaded the Superior Court to award it $15.1 million in damages when the buyer bought a 65% interest in an investment advisory firm for $25 million. The buyer’s premise was that it would not have paid $25 million but for its expectancy that it would manage seven funds for three or more years. But the majority of the assets under management at the investment advisory firm were attributable to accounts other than the seven funds. Significantly, the contract enabled the seller to terminate the buyer’s right to manage the seven funds for any reason, so long as it paid a termination fee capped at $3.5 million, and to terminate the buyer without any compensation if the seller believed its fiduciary duties required or if the buyer’s performance fell below a contractual standard. After three years, the seller could terminate the buyer as manager of the funds for any reason and owe no compensation at all. The Delaware Supreme Court reversed the Superior Court. The Supreme Court found that instead of giving effect to the parties’ contractual bargain, the Superior Court erred by implying contractual obligations on the part of the seller that were inconsistent with the contract’s express terms. This enabled the buyer to obtain in litigation benefits in excess of those potentially available under the contract, and contractual protections that the buyer had failed to obtain in negotiations. The case was remanded for a determination of what, if any, termination fee is due to the buyer because of the seller’s termination of it as manager of the funds. View "Nationwide Emerging Managers, LLC, et al. v. Northpointe Holdings, LLC, et al." on Justia Law

Plaintiff obtained a $23 million judgment against a Corporation. Plaintiff sought to secure payment on that judgment by filing suit in federal district court against the Corporation’s president and its corporate parent, alleging that Defendants had looted the Corporation of more than $18 million in assets in order to render it judgment-proof. After Plaintiff learned that one of the Corporation’s corporate parents planned to merge with an Austrian subsidiary, the district court issued a temporary restraining order, later converted into a preliminary injunction, barring the merger. Defendants nevertheless effected the merger. The district court issued civil contempt sanctions on Defendants for violating the court’s preliminary injunction order. Plaintiff subsequently moved for default judgment based on Defendants’ assertion that they had no intention of complying with the contempt order. The district court entered judgment for Plaintiff and awarded $75 million to Plaintiff. The First Circuit affirmed, holding (1) the district court properly exercised personal jurisdiction over Defendants; (2) Plaintiff’s complaint adequately stated valid causes of action for, inter alia, tortious interference with contractual relations and veil piercing; (3) the district court did not abuse its discretion in entering default judgment as a sanction for Defendants’ discovery violations; and (4) the district court did not err when it entered a damage award without an evidentiary hearing. View "AngioDynamics, Inc. v. Biolitec AG" on Justia Law

At issue in this shareholder class action was the Schwab Total Bond Market, a mutual fund (the Fund). The Fund was created by Schwab Investments (“Schwab Trust”), and its investment adviser was Charles Schwab Investment Management, Inc. (“Schwab Advisor”). The named plaintiff, a registered investment advisery and financial planning firm that had over 200,000 shares of the Fund under its management, filed the class action on behalf of investors who alleged that the managers of the Fund failed to adhere to the Fund’s fundamental investment objectives. The district court dismissed the complaint. The Ninth Circuit reversed in part, vacated in part, and remanded, holding (1) Northstar had standing to prosecute this case; (2) the district judge erred in dismissing Northstar’s breach of contract claims, as Northstar adequately alleged the formation of a contract between the investors and the trustees; (3) the district judge erred in concluding that Northstar failed to successfully allege a breach of any duty owed directly to Fund investors and that those claims would have to be asserted derivatively; and (4) the district judge erred in dismissing Northstar’s third-party beneficiary breach of contract claim, as Northstar adequately alleged that the investors were third-party beneficiaries of the Investment Advisory and Administration Agreement between Schwab Trust and Schwab Advisor. View "Northstar Fin. Advisors v. Schwab Investments" on Justia Law

James Stanley, Barbara Stanley and Northeast Marine Services, Inc. (collectively, “Stanley”) were parties to a binding arbitration with Michael Liberty and five corporations under his control (“the Liberty corporate entities”) regarding contractual and fiduciary disputes arising from Stanley’s tenure as an officer and director of the Liberty corporate entities. Many of Stanley’s claims were rejected, but the three main issues relevant to this appeal were decided in favor of Stanley. The business and consumer docket affirmed the arbitration award in full. The Supreme Court affirmed, holding (1) in challenging the arbitrator’s findings that Stanley had not engaged in a breach of fiduciary duty regarding transactions involving the Liberty corporate corporate entities, Liberty and the Liberty corporate entities asked the court to review fact-findings by the arbitrator, and such findings were not reviewable; (2) Liberty and the Liberty corporate entities did not demonstrate that the arbitrator exceeded his broad authority in interpreting the retirement contract that generated this litigation; and (3) the arbitrator did not exceed his authority by deciding to pierce the corporate veil and make Liberty personally liable for obligations of his closely-controlled corporations. View "Stanley v. Liberty" on Justia Law

DVI Receivables XIV, LLC; DVI Receivables XVI, LLC; DVI Receivables XVII, LLC; DVI Receivables XVIII, LLC; DVI Receivables XIX, LLC; DVI Funding, LLC (collectively, the "DVI Entities"); Lyon Financial Services, Inc. d/b/a U.S. Bank Portfolio Services ("Lyon"); and U.S. Bank, N.A. ("USB") (collectively, "Appellants") appealed a district court decision to affirm a bankruptcy court's final order awarding appellee Maury Rosenberg attorney's fees and costs. The DVI Entities filed an involuntary bankruptcy petition against appellee Rosenberg. After the bankruptcy court dismissed the petition, the court awarded attorney's fees and costs to appellee Rosenberg. The bankruptcy court granted Rosenberg's motion and dismissed the involuntary petition with prejudice. The bankruptcy court found, inter alia, that the DVI Entities were not eligible creditors of Rosenberg because his 2005 guaranty did not run to the DVI Entities. The DVI Entities therefore lacked standing as a matter of law to file an involuntary petition against Rosenberg. In his adversary complaint, Rosenberg asserted federal claims to recover attorney's fees, costs, and damages he incurred because of the filing of the involuntary petition, which the bankruptcy court had dismissed. After careful review of the record and the parties' briefs, and following oral argument, the Eleventh Circuit affirmed in part, vacated in part, and remanded for further proceedings. The Court affirmed the district court's affirmance of the bankruptcy court's award of the following three categories of attorney's fees and costs: (1) fees to obtain the dismissal, (2) appellate fees, and (3) fees on fees. The Eleventh Circuit vacated the district court's affirmance of the bankruptcy court's award of the fourth category of fees and costs, those incurred to prosecute Rosenberg's bad-faith claims for damages, as prematurely entered. The case was remanded back to the district court: (1) to deduct from the total award the limited amount of fees and costs that were incurred solely for the legal work done to prosecute Rosenberg's bad-faith claims for damages; and (2) to reconsider that deducted fee and cost amount along with the motion to supplement. View "DVI Receivables XIV, LLC, et al. v. Rosenberg" on Justia Law

Licensees entered into a licensing agreement with Safeblood Tech for the exclusive rights to market patented technology overseas. After learning that they could not register the patents in other countries, Licensees sued Safeblood for breach of contract and sued Safeblood, its officers, and patent inventor for fraud, constructive fraud, and violations of the Arkansas Deceptive Trade Practices Act (ADTPA), Ark. Code 4-88-101 to -115. The district court dismissed the fraud claims at summary judgment. The remaining claims proceeded to trial and a jury found for Licensees, awarding them $786,000 in contract damages and no damages for violations of the ADTPA. The district court awarded Licensees $144,150.40 in prejudgment interest. The Eighth Circuit reversed as to the common-law fraud claim and the award of prejudgment interest, but otherwise affirmed. Licensees produced sufficient evidence that the inventor made a false statement of fact; the district court did not abuse its discretion when it gave the jury a diminution-in-product-value instruction; and Licensees waived their inconsistent-verdict argument. View "Yazdianpour v. Safeblood Techs., Inc." on Justia Law

Select Comfort manufactures and sells Sleep Number bedding, which has inflatable air chambers that adjust to vary mattress firmness; it sells those beds through its own retail stores. In 2005, Sleepy’s, a bedding retailer, and Select executed an agreement making Sleepy’s a Sleep Number authorized retailer only for Select’s “Personal Preference” line. Sales were disappointing. In response to reports that Select salespeople were disparaging Sleepy’s and its Personal Preference line, Sleepy’s began conducting “secret shops.” Sleepy’s contends its undercover shopping revealed a pattern of disparagement. In 2007, Sleepy’s confronted Select; the parties executed a Wind-Up Agreement. Sleepy’s sued, alleging that Select breached the agreement by failing to provide “first quality merchandise,” and by violating a non-disparagement clause. Sleepy’s also asserted fraudulent inducement, slander per se, breach of the implied covenant of good faith and fair dealing, unfair competition, and violation of the Lanham Act. The district court granted judgment for Select, finding that the contract had expired on September 30, 2006 and that Sleepy’s had consented to the allegedly slanderous statements. The Second Circuit vacated, except with respect to the “first quality merchandise” claim. The court erred in treating “expiration” and “termination” as interchangeable terms referring to the end of the contract term. View "SleepyÂ’s, LLC v. Select Comfort Wholesale Corp." on Justia Law