Justia Contracts Opinion Summaries

The case centers on a bakery and deli operator, Bagelmania Holdings, LLC, which leased property from Somerset Property, LLC. Together, they renovated the building for Bagelmania’s restaurant, hiring RDH Interests, Inc. as architect, JEM Associates West, Inc. as contractor, and Turpin & Rattan Engineering, Inc. for HVAC mechanical engineering. Following the renovation, Bagelmania and Somerset alleged construction defects and sued these entities for breach of contract, breach of the implied covenant of good faith and fair dealing, and negligence, with both plaintiffs represented by the same attorney.Prior attempts to initiate litigation were dismissed for failing to comply with Nevada’s NRS 11.258 requirements, which mandate an attorney affidavit of merit and supporting expert reports in nonresidential construction defect cases. The plaintiffs then filed a joint complaint supported by one affidavit and a set of expert reports. The defendants argued that each plaintiff was required to file separate affidavits and expert reports, and the Eighth Judicial District Court, Clark County, agreed, dismissing the case with prejudice for failure to comply with NRS 11.258, also awarding attorney fees, costs, and interest to the defendants.On appeal, the Supreme Court of the State of Nevada considered whether a single affidavit and set of expert reports sufficed under NRS 11.258 when coplaintiffs, represented by the same attorney, jointly brought identical claims arising from the same alleged defects. The Supreme Court held that, under such circumstances, separate affidavits and expert reports are not required. The Court found that the plaintiffs complied with the statute’s plain language and purpose and that the affidavit and reports met the statutory requirements. The Supreme Court reversed the district court’s dismissal, vacated the post-judgment award of fees, costs, and interest, and remanded for further proceedings. View "Bagelmania Holdings, LLC v. RDH Interests, Inc." on Justia Law

A dispute arose from the design and installation of cabinetry in a luxury home in Charleston, South Carolina. Design Gaps, Inc., owned by David and Eva Glover, had a longstanding business relationship with Shelter, LLC, a general contractor operated by Ryan and Jenny Butler. After being dissatisfied with Design Gaps’ performance, the homeowners, Dr. Jason and Kacie Highsmith, and Shelter terminated their contract with Design Gaps and hired Distinctive Design & Construction LLC, owned by Bryan and Wendy Reiss, to complete the work. The Highsmiths and Shelter initiated arbitration against Design Gaps, which led to the arbitrator ruling in favor of the homeowners and Shelter on their claims, and against Design Gaps on its counterclaims, including those for copyright infringement, tortious interference, and unfair trade practices.After the arbitration, Design Gaps sought to vacate the arbitration award in the United States District Court for the District of South Carolina, but the court instead confirmed the award. Concurrently, Design Gaps filed a separate federal lawsuit against several parties, including some who were not part of the arbitration. The defendants moved to dismiss, arguing that res judicata and collateral estoppel barred the new claims, or alternatively, that the claims failed on other grounds such as the statute of limitations and laches. The district court agreed, dismissing most claims based on preclusion or other legal bars, and granted summary judgment on the remaining claims.The United States Court of Appeals for the Fourth Circuit reviewed the district court’s decisions. The court held that res judicata and collateral estoppel applied to bar most of Design Gaps’ claims, even against parties not directly involved in the arbitration but in privity with those who were. For the remaining claims, the court found they were properly dismissed on grounds such as the statute of limitations, waiver, or laches. The Fourth Circuit affirmed the district court’s judgment in full. View "Design Gaps, Inc. v. Distinctive Design & Construction LLC" on Justia Law

RTI, LLC and RTI Holdings, LLC sought to construct a specialized clinical research facility in Brookings, South Dakota, designed for animal health research trials with stringent air filtration and ventilation requirements. Acting as the general contractor, RTI hired designArc Group, Inc. as architect and several contractors, including Pro Engineering, Inc., Ekern Home Equipment Company, FM Acoustical Tile, Inc., and Trane U.S. Inc., to design and build the facility. After completion in April 2016, RTI experienced significant issues with air pressure, ventilation, and ceiling integrity, leading to contamination problems that disrupted research and resulted in financial losses.The Circuit Court of the Third Judicial Circuit, Brookings County, reviewed RTI’s claims for breach of contract and breach of implied warranties against the architect and contractors. All defendants moved for summary judgment, arguing that RTI’s claims were based on professional negligence and required expert testimony, which RTI failed to provide. The circuit court agreed, finding RTI’s CEO unqualified as an expert, and granted summary judgment to all defendants. The court also denied RTI’s motion to amend its complaint to add negligence claims, deeming the amendment untimely and futile due to the lack of expert testimony.The Supreme Court of the State of South Dakota affirmed the summary judgment for designArc, Pro Engineering, and FM Acoustical, holding that expert testimony was required for claims involving specialized design and construction issues, and that RTI’s CEO was not qualified to provide such testimony. However, the court reversed the summary judgment for Trane and Ekern, finding genuine issues of material fact regarding Trane’s alleged faulty installation and Ekern’s potential vicarious liability. The court also reversed the denial of RTI’s motion to amend the complaint, concluding the proposed amendments were not futile and would not prejudice Trane or Ekern. The case was remanded for further proceedings. View "RTI, LLC v. Pro Engineering" on Justia Law

A residential community consisting of sixty-seven homes was developed and sold by a developer, with a separate contractor responsible for construction. Each homebuyer entered into a purchase agreement with the developer, which included an anti-assignment clause stating that the agreement and the buyer’s rights under it could not be assigned without the developer’s written consent. The developer later created a homeowners’ association (HOA) to manage the community’s common areas and certain aspects of the homes’ exteriors. After construction, the HOA alleged that the community suffered from construction defects and filed suit against both the developer and the contractor, asserting claims under Arizona’s dwelling action statutes and for breach of the implied warranty of workmanship and habitability.The Superior Court in Maricopa County granted summary judgment for the defendants, holding that the HOA had no legal right to assert a claim for breach of the implied warranty and that the purchase agreement’s anti-assignment clause barred homeowners from assigning such claims to the HOA. The Arizona Court of Appeals affirmed, reasoning that the implied warranty claim was part of the contract and that the anti-assignment clause validly precluded assignment of those claims to the HOA.The Supreme Court of the State of Arizona reviewed the case to determine whether the anti-assignment clause prevented homeowners from assigning their accrued claims for breach of the implied warranty to the HOA. The court held that the anti-assignment clause, which prohibited assignment of the agreement and the buyer’s rights under it, did not prohibit the assignment of accrued claims for damages arising from breach of the implied warranty. The court distinguished between assignment of contract rights and assignment of claims for damages, concluding that the latter was not barred by the agreement’s language. The Supreme Court vacated the relevant portions of the Court of Appeals’ decision, reversed the trial court’s summary judgment on the implied warranty claim, and remanded for further proceedings. View "POINTE 16 v GTIS-HOV" on Justia Law

A general contractor was hired to oversee the construction of a hotel in Vermont and subcontracted with a firm to install metal siding panels manufactured by a third party. The subcontractor relied on installation instructions available on the manufacturer’s website, which did not specify the use of a splice plate to connect the panels. The panels were installed without splice plates, and after construction, the panels began to detach from the building, causing some to fall and damage nearby property. The contractor later discovered that the manufacturer had created an instruction sheet in 2006 recommending splice plates, but this information was not publicly available at the time of installation.The contractor initially sued the installer for breach of contract, warranty, and negligence in the Vermont Superior Court, Chittenden Unit, Civil Division. The complaint was later amended to add a product liability claim against the manufacturer. After further discovery, the contractor sought to amend the complaint a third time to add new claims against the manufacturer, arguing that new evidence justified the amendment. The trial court denied this motion, citing undue delay and prejudice to the manufacturer, and granted summary judgment to the manufacturer on the product liability claim and on a crossclaim for implied indemnity brought by the installer, finding both barred by the economic-loss rule.On appeal, the Vermont Supreme Court affirmed the trial court’s decisions. The Court held that the trial court did not abuse its discretion in denying the third motion to amend due to undue delay and prejudice. It also held that the economic-loss rule barred the contractor’s product liability claim, as neither the “other-property” nor “special-relationship” exceptions applied. Finally, the Court found the contractor lacked standing to appeal the summary judgment on the installer’s implied indemnity claim. View "PeakCM, LLC v. Mountainview Metal Systems, LLC" on Justia Law

A construction worker employed by a subcontractor was injured when a scaffold collapsed at a Manhattan worksite. The worker sued the property owner and general contractor in New York Supreme Court, alleging negligence and violations of state labor laws. The owner’s insurer, Liberty Insurance Corporation, sought a declaration in federal court that the subcontractor’s insurer, Hudson Excess Insurance Company, was obligated to defend and indemnify the owner as an additional insured under the subcontractor’s commercial general liability policy. The subcontract between the general contractor and the subcontractor required the latter to provide insurance coverage for the owner and general contractor.In the New York Supreme Court, summary judgment was granted to the injured worker on some claims, while other claims remained pending. The court denied summary judgment to the owner on its contractual indemnification claim against the subcontractor, finding factual questions about the scope of the subcontractor’s work. Later, after the federal district court’s decision, the state court dismissed all third-party claims against the subcontractor, finding the indemnity provision in the subcontract invalid due to lack of a meeting of the minds.The United States Court of Appeals for the Second Circuit reviewed the case. It affirmed the district court’s finding, after a bench trial on stipulated facts, that the subcontractor’s actions proximately caused the worker’s injuries and that Hudson owed a duty to indemnify the owner under the policy. The Second Circuit held that the later state court decision did not alter this result. However, the Second Circuit reversed the district court’s award of attorney’s fees to Liberty, holding that Hudson was entitled to a statutory safe harbor under New York Insurance Law, and thus was not required to pay Liberty’s attorney’s fees for the federal action. View "Liberty Insurance Corp. v. Hudson Excess Insurance Co." on Justia Law

A dispute arose between a surety bond company, Granite Re, Inc. (Granite), and a creditor bank, United Prairie Bank (UPB), over entitlement to funds held by a receiver in a receivership action. Granite issued payment bonds to Molnau Trucking LLC (Molnau) for public works projects, but Molnau defaulted on both the projects and loans from UPB. The issue was whether Granite or UPB had priority to the bonded contract funds held by the receiver. Granite argued for priority under equitable subrogation, having paid laborers and suppliers, while UPB claimed priority under the UCC, having perfected its security interests in Molnau’s accounts receivable before Granite issued the bonds.The district court granted summary judgment in favor of UPB, recognizing Granite’s equitable subrogation rights but ruling that UPB’s perfected security interest had priority. The court of appeals affirmed, applying a “mistake of fact” standard from mortgage context case law, which Granite did not meet.The Minnesota Supreme Court reviewed the case and held that the “mistake of fact” standard does not apply to performing construction sureties. The court concluded that Granite, as a surety, has the right to equitable subrogation without needing to show a mistake of fact. The court further held that a surety’s right to equitable subrogation is not a security interest subject to the UCC’s first-in-time priority rule. Instead, a performing surety has priority over a secured creditor regarding bonded contract funds.The Minnesota Supreme Court reversed the court of appeals’ decision and remanded the case to the district court for entry of judgment in favor of Granite, allowing Granite to request redistribution of the bonded contract funds. View "In re Receivership of United Prairie Bank v. Molnau Trucking LLC" on Justia Law

Bighorn Construction, LLC (Bighorn) and JED Spectrum, Inc. (JED) filed mechanic’s liens against property owned by Keith Stoakes, seeking to foreclose on the liens. Stoakes denied the validity of the liens and counterclaimed for slander of title against both companies, and for breach of contract, promissory estoppel, and fraud against JED. After a bench trial, the circuit court denied Bighorn’s and JED’s claims for lien foreclosure and ruled in favor of Stoakes on his slander of title claims, awarding him $252,225.27 in damages and $33,394.20 in attorney fees. The court denied relief on the remaining claims.The circuit court found that Bighorn had no reasonable grounds to file the lien after receiving a check for full payment, and that JED’s lien was untimely and insufficiently itemized. The court also found that Stoakes reasonably relied on JED’s promise of a shared well system, awarding him damages for promissory estoppel. However, the court later reversed its decision on the promissory estoppel claim and reduced the attorney fee award accordingly.The Supreme Court of South Dakota reviewed the case. It reversed the circuit court’s ruling on the slander of title claims, finding insufficient evidence to prove that Jerry, acting on behalf of Bighorn and JED, knew or recklessly disregarded the falsity of the liens. The court affirmed the denial of Stoakes’s promissory estoppel claim, concluding that Stoakes did not suffer substantial economic detriment. The court also affirmed the attorney fee award of $33,394.20 to Stoakes, as it was within the court’s discretion under SDCL 44-9-42. View "Jed Spectrum, Inc. v. Stoakes" on Justia Law

Kratzer Construction entered into a subcontract with Hardy Construction Co. to perform work on a building addition for Ekalaka Public Schools. Kratzer completed the work and submitted pay applications, including one for $92,856.45, which Hardy partially disputed due to unapproved change orders. Hardy offered to pay $81,153 upon Kratzer signing a release, but Kratzer refused, demanding the full amount plus interest. Hardy later offered the same amount without requiring a release, but Kratzer still declined, insisting on interest.The Sixteenth Judicial District Court granted summary judgment to Kratzer, ruling that Hardy owed $81,153 plus 18% interest from January 6, 2022, and attorney fees, as Kratzer was deemed the prevailing party. Hardy appealed, arguing that Kratzer failed to meet a condition precedent in the subcontract requiring submission of releases from his subcontractors before final payment.The Supreme Court of Montana reviewed the case and concluded that the subcontract's provisions were clear and unambiguous. The court determined that Kratzer's failure to submit the required releases constituted a breach of the subcontract, and Hardy was entitled to withhold payment. The court found that Hardy's offers to settle did not constitute a waiver of the condition precedent or a novation of the contract.The Supreme Court reversed the District Court's summary judgment in favor of Kratzer, including the awards for interest and attorney fees. The court remanded the case for entry of judgment in favor of Hardy, requiring Hardy to pay Kratzer $81,153 for services rendered under the subcontract, less reasonable attorney fees and costs incurred by Hardy. View "Kratzer Construction v. Hardy Construction" on Justia Law

A contractor hired a subcontractor to work on a remote bridge construction project. The scope of the work changed, and neither party kept detailed records of the changes and associated costs. Years after the project was completed, the subcontractor sued for damages, claiming unpaid work. The superior court found that the subcontract did not govern the extra work, awarded some damages to the subcontractor, and precluded some claims due to discovery violations. The court also found the contractor to be the prevailing party and awarded attorney’s fees. Both parties appealed.The superior court denied summary judgment motions from both parties, finding factual disputes. It precluded the subcontractor from pursuing certain damages claims due to insufficient documentation but allowed evidence for contingent findings. After a bench trial, the court awarded the subcontractor $191,443.42, later reduced to $146,693.42 upon reconsideration. The court found the contractor to be the prevailing party under Rule 68 and awarded attorney’s fees.The Supreme Court of Alaska reviewed the case. It concluded that the superior court abused its discretion by precluding the subcontractor’s claims for snowmachine use and labor without considering less severe sanctions. The court affirmed the superior court’s findings on other damages but reversed the awards for Morris Johnson’s labor and boat use, remanding for recalculation. The prevailing party determination and attorney’s fee award were vacated and remanded for reconsideration. The court otherwise affirmed the superior court’s judgment. View "Johnson v. Albin Carlson & Co." on Justia Law