Justia Contracts Opinion Summaries
Articles Posted in Commercial Law
Malik v. Falcon Holdings, LLC
The LLC was organized in 1999 to own and operate 100 fast-food restaurants. Khan owned 40% of the common units. Remaining common units, and all preferred units, were owned by Sentinel. Plaintiffs, restaurant managers, claim that they accepted lower salaries because Khan told them that he would acquire full ownership and would reward top managers with equity. In 2005, Khan became the sole equity owner, but did not distribute common units to any managers. Plaintiffs calculated that the price paid for Sentinel's interest implied that the business was worth about $48 million; in 2005, 20 managers qualified for units, so each lost about $1.2 million. The district court held that plaintiffs had not adequately estimated damages. The Seventh Circuit reversed, stating that value is what people will pay. The judiciary should not reject actual transactions prices when they are available.
A.E. Robinson Oil Co. v. County Forest Products, Inc.
Galen Porter was the sole shareholder in County Forest Products. Porter began operating a fuel delivery business as Porter Cash Fuel but never registered that name with the Secretary of State. Porter ordered fuel and gas from A.E. Robinson in a series of transactions that continued for three years. Ultimately, the business relationship deteriorated, and A.E. Robinson refused to deliver any more products. A.E. Robinson sued County Forest and Porter seeking payment on the account. Following a non-jury trial, the court entered judgment for A.E. Robinson jointly and severally against County Forest and Porter in the amount of the invoices plus financing charges and attorney fees. The Supreme Court modified the judgment to remove the award of attorney fees and affirmed as modified, holding that the trial court (1) properly held Porter and County Forest jointly and severally liable; but (2) erred in awarding attorney fees to A.E. Robinson pursuant to Me. Rev. Stat. 2-207.
St. Joe Co. v. Norfolk Redev. and Hous. Auth.
Norfolk Redevelopment and Housing Authority (NRHA) filed a complaint against the St. Joe Company and Advantis Real Estate Services Company alleging unjust enrichment and seeking imposition of a constructive trust and recovery of funds supplied by NRHA to its agent, Advantis, for the payment of contractors who had performed services for NRHA. St. Joe held a perfected secured interest in Advantis's operating account and exercised its rights as a secured creditor over that account to have funds from Advantis's account, including those entrusted to Advantis as NRHA's agent, transferred to a St. Joe account. The circuit court entered summary judgment in favor of NRHA. The Supreme Court affirmed, holding that the imposition of a constructive was was proper and necessary to prevent a failure of justice and unjust enrichment.
First Am. Title Ins. Co. v. W. Surety Co.
First American Title Insurance Company (FATIC) provided title insurance for a mortgage refinancing to SunTrust Mortgage through FATIC's title agent, First Alliance. First Alliance subsequently obtained a $100,000 surety bond pursuant to the Virginia Consumer Real Estate Settlement Protection Act (CRESPA) from Western Surety (Western). After the property owner defaulted under the original mortgages, SunTrust lost $734,296. FATIC paid the full amount of this loss then made a formal demand upon Western for $100,000. Western refused to pay FATIC the amount of the surety bond. FATIC sued Western and First Alliance for breach of contract. The district court entered judgment in FATIC's favor for $100,000. The Supreme Court held (1) CRESPA does not recognize a private cause of action that may be asserted against a surety and the surety bond issued pursuant to former Va. Code Ann. 6.1-2.21(D)(3); (2) Virginia law nonetheless permits a cause of action against a surety and the surety bond executed pursuant to CRESPA by the assertion of a common law claim; and (3) a title insurance company may have standing, not in its own right, but as a subrogee of its insured, to maintain a cause of action against a surety and the surety bond.
Universal Drilling Co., LLC v. R & R Rig Serv., LLC
R & R Rig Service moved Universal Drilling Company's drilling rig under a time and materials contract. Universal refused to pay R & R's invoice, claiming that it should only have to pay the amount it paid to have the rig moved a few weeks later by a different company. R & R brought suit for payment of the services it rendered, and Universal counterclaimed on the basis of fraud and breach of the implied covenant of good faith and fair dealing. The district court generally ruled in favor of R & R and against Universal, although it refused to grant R & R's request for pre-judgment interest. The Supreme Court affirmed in part and reversed and remanded in part, holding that the district court (1) did not err in awarding damages; (2) did not err in ruling that Universal had failed to prove its fraud claim; (3) properly denied Universal's claim for breach of the implied covenant of good faith and fair dealing; and (4) erred in denying R & R's request for prejudgment interest. Remanded with directions to award R & R prejudgment interest.
Rebuild America, Inc. v. Davis
The Davises failed to pay the real estate tax for their property, resulting in a statutory tax. The Davises then filed a petition for bankruptcy, which was granted. Subsequently, the sheriff sold the tax lien. After the statutory time period that the Davises could redeem the property had passed and the property remained unredeemed, the tax lien purchaser received a tax deed conveying the Davises' property. The trial court set aside the tax deed, concluding that the tax lien sale should not have been held because the Davises had been in bankruptcy and because the sheriff did not give sufficient notice to the Davises of the tax delinquency, lien, and sale. The Supreme Court reversed, holding that the trial court erred (1) in considering issues relating to the sufficiency of the sheriff's service of the notices; (2) in considering the sheriff's pre-sale notices to the Davises, as only the post-sale notice to redeem is relevant in a lawsuit to set aside a tax deed; and (3) by granting judgment without making sufficient findings of fact and conclusions of law as to the effect the Davises' bankruptcy had on the tax lien. Remanded.
Salling v. Budget Rent A Car Sys., Inc.
Plaintiff rented a car, drove 64 miles in one day, refilled the fuel tank, and returned the car to the same location from which he rented the car. In addition to rental and other fees that he does not dispute, he was charged a $13.99 fuel service fee that he challenged by filing a putative class action, claiming breach of contract, fraud, and unjust enrichment. Defendant claimed that, because plaintiff drove fewer than 75 miles during the rental period, to avoid the charge he was required to return the car with a full fuel tank and to submit a receipt. The district court dismissed, finding that the contract was not ambiguous. The Sixth Circuit affirmed, citing the voluntary payment doctrine.
Schultz v. Gen. Elec. Healthcare Fin. Servs., Inc.
General Electric (GE) obtained a judgment against Intra-Med for breach of contract. Thomas Schultz was the president and sole shareholder of Intra-Med. After collecting only a portion of the judgment, GE intervened in another lawsuit and filed a third-party complaint against Schultz seeking to pierce the corporate veil and hold him personally liable for the judgment against Intra-Med. The trial court entered judgment on the pleadings in favor of GE, allowing GE to pierce Intra-Med based upon the instrumentality theory of veil piercing. The court of appeals affirmed, concluding (1) none of Schultz's affirmative defenses negated the fact that he admittedly used corporate funds and property as his own to GE's detriment, and (2) Schultz's admissions fulfilled the requirements for piercing the corporate veil and supported the trial court's judgment on the pleadings. The Supreme Court reversed, holding that the trial court improperly granted GE's motion for judgment on the pleadings, as Schultz's admissions did not conclusively establish harm, fraud, or unjust loss, the three elements that must be established to warrant a piercing of the corporate veil under the instrumentality theory.
ADT Sec. Servs., Inc. v. Lisle-Woodridge Fire Prot. Dist.
In 2009 the fire protection district adopted an ordinance requiring commercial buildings and multi-family residences to have fire alarms equipped with wireless radio technology to send alarm signals directly to the district's central monitoring board. The ordinance provided that the district would contract with one private alarm company to provide and service signaling equipment, displacing several private fire alarm companies that have competed for these customers. The alarm companies sued on claims under the U.S. Constitution, federal antitrust law, and state law. The district court granted summary judgment for the alarm companies on the basis of state law and enjoined the district from implementing the ordinance. The Seventh Circuit affirmed in part, holding that the district has statutory authority to require that commercial and multi-family buildings connect directly to its monitoring board through wireless radio technology. The district does not, however, have authority to displace the entire private market by requiring all customers to buy services and equipment from itself or just one private company.
Greenwood Products v. Greenwood Forest Products
Plaintiffs Greenwood Products, Inc. and Jewett-Cameron Lumber Corp. obtained a jury verdict in their favor on a breach of contract claim against Defendants Forest Products, Dovenberg, and LeFors. They appealed the Court of Appeals' decision that reversed the judgment entered on that verdict. The contract in question required Defendants to sell, and Plaintiffs to buy all of Defendants' inventory, for a certain percentage over Defendants' cost for that inventory. Plaintiffs alleged that Defendants had breached the contract by erroneously accounting for their cost of inventory, causing Plaintiffs to pay $820,000 more for the inventory than they should have. Defendants moved for a directed verdict on the breach of contract claim, but the trial court denied the motion and sent the claim to the jury, which returned a verdict for Plaintiffs. The Court of Appeals held that the trial court should have granted defendants' motion for a directed verdict because the contract did not impose any obligation on defendants to accurately account for the cost of the inventory. Upon review, the Supreme Court concluded that the trial court in this case properly rejected each of the grounds that Defendants' raised at trial for granting their motion for a directed verdict. The Court also concluded that the additional argument that the Court of Appeals relied on in reversing the trial court was not preserved, and therefore reversed the appellate court's decision overturning the trial court.