Justia Contracts Opinion Summaries

Articles Posted in California Courts of Appeal
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A general contractor and subcontractor filed suit against each other, and at issue was the "retention" clause in the parties' contract. The Court of Appeal held that the trial court properly granted summary judgment for the general contractor and dismissed the subcontractor's cross-claims. The court held that the purpose of the retention clause was, as the subcontractor put it in oral argument, to "ensure proper performance." In this case, the subcontractor did not finish the job swiftly and must suffer the consequences of its contractual failing. Finally, the court held that the trial court properly awarded attorney fees to the general contractor, as the prevailing party. View "Regency Midland Construction, Inc. v. Legendary Structures Inc." on Justia Law

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Handoush, a store owner, sued LFG regarding a lease for credit card processing equipment. The complaint alleges fraud, rescission, and violation of Business and Professions Code section 17200. The lease agreement states that it “shall be governed by the laws of the State of New York,” that any disputes shall be litigated in New York, and that the parties waived their rights to a jury trial. California precedent (Grafton), forbids pre-dispute jury trial waivers; under New York law such waivers are enforceable. The court dismissed, finding that Handoush did not meet his heavy burden of demonstrating that the forum selection clause is unreasonable and that “the right to trial by jury is not unwaivable” under Code of Civil Procedure section 631. The court of appeal reversed. The trial court erred in enforcing the forum selection clause in favor of a New York forum where the clause includes a pre-dispute jury trial waiver, which Grafton instructs is unenforceable under California law. LFG failed to show that enforcement of the forum selection clause would not substantially diminish the rights of California residents in a way that violates California's public policy. View "Handoush v. Lease Finance Group, LLC" on Justia Law

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TWC operated a Walnut Creek Toyota dealership. The Davises sought employment at TWC, to run its special finance department. The Davises are African-American, and Donald Davis is over the age of 40. The Davises were required to sign agreements providing that the Davises agreed to arbitration. The three agreements are all different. After the Davises became employed, TWC hired a new General Manager, Colon. The Davises claim that Colon “began to systematically undermine [the Davises’s] programs,” an effort “punctuated by shockingly inappropriate ageist and racist comments to and about them.” The Davises eventually resigned, filed complaints with the Department of Fair Employment and Housing, and obtained right to sue letters. The defendants filed an unsuccessful petition to compel arbitration. The court found there was an agreement to arbitrate, but found both procedural and substantive unconscionability. The court of appeal affirmed, noting TWC’s “lack of candor” concerning the agreements. The court noted the “take it or leave it” pressure under which the agreements were signed, the inconsistency between the agreements, how hard it would be for a layman to read the agreements, and the inclusion of broad provisions in violation of public policy. View "Davis v. TWC Dealer Group, Inc." on Justia Law

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Defendant-appellant Rugger Investment Group LLC (Rugger) entered into a contract to sell an airplane to plaintiffs-respondents Magic Carpet Ride, LLC (MCR) and Kevin Jennings. Rugger deposited a lien release into escrow eight days after the expiration of a 90-day period in which it was required to do so. The trial court found Rugger could not claim substantial performance because it had violated the plain language of the contract. For that reason, the court granted the motion of MCR and Jennings for summary adjudication of their breach of contract cause of action and for summary adjudication of Rugger’s rescission and breach of contract causes of action. Voluntary dismissal of other causes of action produced an appealable final judgment. The Court of Appeal reversed and remanded, finding that whether Rugger substantially performed its contract obligations was a triable issue of material fact that precluded summary adjudication. "[A] provision in the parties’ contract making time of the essence does not automatically make Rugger’s untimely performance a breach of contract because there are triable issues regarding the scope of that provision and whether its enforcement would result in a forfeiture to Rugger and a windfall to MCR." View "Magic Carpet Ride v. Rugger Investment Group" on Justia Law

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Ron Koenig was the superintendent and principal of the Warner Unified School District (the district). He and the district entered an agreement to terminate his employment one year before his employment agreement was due to expire. Under the termination agreement, Koenig agreed to release any potential claims against the district in exchange for a lump sum payment equivalent to the amount due during the balance of the term of his employment agreement, consistent with Government Code section 53260. The district also agreed to continue to pay health benefits for Koenig and his spouse "until Koenig reaches age 65 or until Medicare or similar government provided insurance coverage takes effect, whichever occurs first." The district stopped paying Koenig's health benefits 22 months later. Koenig then sued to rescind the termination agreement and sought declaratory relief he was entitled to continued benefits pursuant to his underlying employment agreement, which provided that Koenig and his spouse would continue receiving health benefits, even after the term of the agreement expired. After a bench trial, the trial court determined the district's promise in the termination agreement to pay health benefits until Koenig turned 65 violated section 53261, was unenforceable, and rendered the termination agreement void for lack of consideration. Both Koenig and the district appealed the judgment entered after trial. Koenig contended the trial court properly determined the termination agreement was void but should have concluded he was entitled to continued health benefits until the age of 65. The district contended the trial court erred when it concluded the termination agreement was void; rather, the trial court should have severed the termination agreement's unenforceable promise to continue paying benefits, enforced the remainder of the termination agreement, and required Koenig to pay restitution for benefits paid beyond the term of the original agreement. The Court of Appeal concluded the termination agreement's unlawful promise to pay health benefits in excess of the statutory maximum should have been severed to comply with sections 53260 and 53261, Koenig did not establish he was entitled to rescind the termination agreement, and the district was entitled to restitution for health benefits paid beyond the statutory maximum. Judgment was reversed and the trial court directed to enter judgment in favor of the district for $16,607. View "Koenig v. Warner Unified School District" on Justia Law

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After a customer purchased a pharmaceutical product from Target (the retailer) which was distributed by McKesson (the supplier), she experienced an adverse reaction to the product that resulted in serious bodily injury. The customer filed suit against Target, and McKesson and Golden State Insurance (the carrier) refused to defend it. Target then filed suit against McKesson and Golden State, seeking to compel them to defend it. The trial court granted McKesson and Golden State's motion for summary adjudication. The Court of Appeal affirmed, holding that the indemnification/defense clause in McKesson's contract with Target and the additional insured endorsement did not require McKesson and Golden State to defend Target against the customer's lawsuit. In this case, the customer's claim was based on Target's mislabeling of a product that was not defective. Therefore, Target's actions came within the exclusions of the additional insured endorsement for repackaging and labeling and relabeling. Furthermore, the additional insured endorsement did not impose on McKesson a duty to provide additional insured coverage that would protect Target from the customer's claim that it had mislabeled the medication and had failed to warn of possible adverse reactions and side effects. View "Target Corp. v. Golden State Insurance Co. Ltd." on Justia Law

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In 2005, Protective Life Insurance Company (Protective Life) issued William McHugh a 60-year term life policy (the policy) that provided for a 31-day grace period before it could be terminated for failure to pay the premium. McHugh failed to pay the premium due on January 9, 2013, and his policy lapsed 31 days later. McHugh passed away in June 2013. This appeal raised one fundamental issue: whether Insurance Code sections 10113.71 and 10113.72 ("the statutes"), which came into effect on January 1, 2013, applied to term life insurance policies issued before the statutes' effective date. Mchugh's daughter, Blakely McHugh, the designated beneficiary under the policy, and Trysta Henselmeier (appellants) sued Protective Life for breach of contract and breach of the implied covenant of good faith and fair dealing, claiming Protective Life failed to comply with the statutes' requirement that it provide a 60-day grace period before it terminated the policy for nonpayment of premium. The parties filed various trial court motions, and Protective Life, relying largely on interpretations of the Department of Insurance (the Department) argued that the statutes did not apply retroactively to McHugh's policy and the claim. The court rejected Protective Life's arguments and ruled that the statutes applied to the claim. The matter proceeded to jury trial and Protective Life prevailed. Appellants appealed both a special verdict in favor of Protective Life and an order denying their motion for judgment notwithstanding the verdict (JNOV). Pursuant to Code of Civil Procedure section 906, Protective Life requested that the Court of Appeal affirm the verdict on the additional ground that the statutes did not apply to the policy and the trial court erred by ruling to the contrary when it denied Protective Life's motion for a directed verdict. The Court of Appeal concurred with Protective Life, finding the trial court should have granted the company’s motion for a directed verdict. View "McHugh v. Protective Life Insurance" on Justia Law

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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

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Quidel Corporation (Quidel) petitioned for a writ of mandate and/or prohibition to direct the trial court to vacate its order granting summary judgment. Quidel contended the trial court incorrectly concluded a provision in its contract with Beckman Coulter, Inc. (Beckman) was an invalid restraint on trade in violation of Business and Professions Code section 16600. In 1996, Biosite Inc. (Biosite; Quidel is the successor in interest to Biosite) licensed patent rights and know-how related to a B-type natriuretic peptide (BNP), which can be measured in a person's blood. The semi-exclusive licensing agreement allowed Biosite to develop an immunoassay to determine the level of BNP in a person's blood sample, to help diagnose congestive heart failure. After acquiring the intellectual property rights and know-how, Biosite developed and created a BNP assay for use with its point-of-care analyzer device, and it obtained regulatory approval. By 2003, Beckman had developed a laboratory analyzer, but it did not have a license for a BNP assay compatible with its analyzer. Around this same time, other companies were also pursuing BNP assays for use with their larger analyzers, which could run multiple, different immunoassays at higher volumes than the point-of-care analyzer Biosite had. Collaborating would mean Biosite could expand its customer base to those who wanted to use the larger capacity laboratory analyzers and Beckman could include the BNP assay in its menu of immunoassay offerings. Biosite and Beckman negotiated the Agreement over several months, and they exchanged numerous drafts before executing it. The Agreement prohibited Biosite from engaging other manufacturers to provide the BNP assay for their competing lab analyzers. The term of the Agreement was negotiated to coincide with the term of a related licensing agreement Biosite had with another company, Scios. Section 5.2.3 of the Agreement prohibited Beckman from researching or developing an assay that detected the presence or absence of the BNP or NT-proBNP proteins or markers for use in diagnosing cardiac disease until two years before the Agreement's expiration. Beckman sued Quidel for declaratory relief for violation of section 16600 and violation of the Cartwright Act, asking the Court to declare section 5.2.3 of the Agreement was void and unenforceable and to issue a permanent injunction preventing the enforcement of section 5.2.3 of the Agreement. Quidel argued the trial court improperly extended the holding from Edwards v. Arthur Andersen LLP, 44 Cal.4th 937 (2008) beyond the employment context to section 5.2.3 of the Agreement. The Court of Appeal determined the trial court's per se application of section 16600 to section 5.2.3 of the Agreement between Quidel and Beckman was not correct, granted Quidel’s petition and issued a writ instructing the trial court to vacate the December 7, 2018 order granting summary adjudication on the first cause of action. View "Quidel Corporation v. Super. Ct." on Justia Law

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Defendant, a 24-hour skilled nursing facility, appealed an order denying its petition to compel arbitration of claims asserting negligent or willful misconduct, elder abuse, and wrongful death filed against it by decedent’s daughter as successor in interest and individually. The trial court found the successor claims were not arbitrable because no arbitration agreement existed between decedent and defendant, given defendant’s failure to prove daughter had authority to sign the agreement on decedent’s behalf. The court further found the arbitration agreement was unenforceable against daughter individually on grounds of unconscionability. Finding no reversible error, the Court of Appeal affirmed the trial court order. View "Lopez v. Bartlett Care Center, LLC" on Justia Law