Justia Contracts Opinion Summaries

A black-owned construction company was not invited to bid as general contractor on a major Boston public housing redevelopment project after participating in pre-construction work. Years earlier, the developer had called the company’s president to discuss possible involvement, but the parties disputed what promises, if any, were made during that conversation. The construction company performed pre-construction work and was later selected as general contractor for the first phase (Camden), but after performance and communication issues arose during that project, the developer chose a different, white-owned company for the second phase (Lenox). The construction company did not protest at the time but later sued, alleging breach of contract, quasi-contract, violation of Massachusetts consumer protection law, and racial discrimination under 42 U.S.C. § 1981.The matter was first brought in Massachusetts state court, then removed to the United States District Court for the District of Massachusetts based on federal question jurisdiction. After discovery, the developer moved for summary judgment. The District Court granted summary judgment for the developer, finding no enforceable contract or promise had been made regarding the Lenox phase, that the quasi-contract and Chapter 93A claims failed as derivative, and that there was insufficient evidence of racial discrimination.The United States Court of Appeals for the First Circuit affirmed the District Court’s decision. The First Circuit held that the summary judgment record did not contain evidence from which a reasonable jury could find an enforceable implied-in-fact contract or a promise sufficient for promissory estoppel. It further held that the plaintiff failed to create a triable issue of fact regarding pretext or discriminatory intent under § 1981, given the legitimate business reasons cited for the company’s exclusion. Thus, summary judgment on all claims was proper. View "John B. Cruz Construction Co. v. Beacon Communities Corp." on Justia Law

A Montana limited liability company and its sole member obtained a $450,000 loan secured by real property from a lender affiliated with New York-based entities. The loan documents included a promissory note, guaranty, and deed of trust, all referencing the lender as Axos Bank, though the servicing and assignment of the loan eventually resided with the lender’s subsidiaries. The loan imposed a high annual interest rate, and after the company defaulted, the property was sold. The borrower alleges it paid more than twice the loan amount and asserts that the lender’s arrangement with Axos Bank was a scheme to avoid Montana’s usury laws.The borrowers sued in the Montana Eighteenth Judicial District Court, seeking, among other relief, a declaration that the lender—not Axos Bank—was the true lender and subject to Montana usury law. The lender moved to dismiss and compel arbitration under the arbitration provisions in the loan documents. The District Court considered extrinsic evidence, including the borrower’s declaration, and found that the arbitration provisions conflicted with bold, capitalized jury trial waiver language, resulting in ambiguity. The District Court determined that the borrower had not knowingly, voluntarily, and intelligently waived its constitutional right of access to the courts, denied the motion to compel arbitration, and the lender appealed.The Supreme Court of the State of Montana reviewed the District Court’s denial of the motion to compel arbitration de novo. The Supreme Court affirmed, holding that the loan documents were ambiguous due to conflicting provisions regarding dispute resolution, and that such ambiguity prevented the borrower from giving the required knowing, voluntary, and intelligent consent to arbitrate and waive constitutional rights. As a result, the arbitration provisions were held unenforceable, and the District Court’s denial of the motion to compel arbitration was affirmed. View "Bluebird v. World Business Lenders" on Justia Law

Edward and Linda Diaz purchased a motorhome from a California dealer, receiving warranties from the manufacturer that included a clause requiring any legal disputes related to the warranties to be litigated exclusively in Indiana, where the motorhome was manufactured. The warranties also contained a choice-of-law provision favoring Indiana law and a waiver of jury trial. After experiencing issues with the vehicle that were not remedied under warranty, the Diazes sued the manufacturer, dealer, and lender in California under the Song-Beverly Consumer Warranty Act, alleging failure to repair defects and refusal to replace or refund the vehicle.The Superior Court of Los Angeles County granted the defendants’ motion to stay the California action, enforcing the forum selection clause. The manufacturer had offered to stipulate that it would not oppose application of California’s Song-Beverly Act or a jury trial if the Diazes pursued their claims in Indiana. The court ordered the manufacturer to sign such a stipulation, holding that the Diazes could seek to lift the stay if Indiana courts declined to apply California law.On appeal, the California Court of Appeal, Second Appellate District, Division Eight, concluded that the forum selection clause was unenforceable. The court held that the warranty’s terms, including the forum selection and choice-of-law provisions, violated California public policy by purporting to waive unwaivable statutory rights under the Song-Beverly Act. The court determined that the manufacturer’s post hoc offer to stipulate to California law did not cure the unconscionability present at contract formation and that severance of the unlawful terms would not further the interests of justice. As a result, the Court of Appeal reversed the trial court’s order staying the California action and directed entry of a new order denying the stay. View "Diaz v. Thor Motor Coach, Inc." on Justia Law

Two individuals each purchased a Mercedes-Benz vehicle that included a subscription-based system called “mbrace,” which provided various features through a 3G wireless network. When newer cellular technology rendered the 3G-dependent system obsolete, both customers asked their dealerships to replace the outdated system at no charge, but their requests were denied. Subsequently, they filed a class action lawsuit against Mercedes-Benz USA, LLC and Mercedes-Benz Group AG, asserting claims including breach of warranty under federal and state law.The United States District Court for the Northern District of Illinois, Eastern Division, considered Mercedes’s motion to compel arbitration pursuant to the Federal Arbitration Act, based on the arbitration provision within the mbrace Terms of Service. The district court found in favor of Mercedes, concluding that the plaintiffs were bound by an agreement to arbitrate their claims. Since neither party requested a stay, the court dismissed the case without prejudice. The plaintiffs appealed, arguing that they had not agreed to arbitrate.The United States Court of Appeals for the Seventh Circuit reviewed the district court’s factual findings for clear error and legal conclusions de novo. Applying Illinois contract law, the appellate court determined that Mercedes had provided sufficient notice of the arbitration agreement to the plaintiffs through the subscription activation process and follow-up communications. The court found that Mercedes established a rebuttable presumption of notice, which the plaintiffs failed to overcome, as they only stated they did not recall receiving such notice, rather than expressly denying it. The Seventh Circuit held that the plaintiffs had assented to the agreement by subscribing to the service and thus were bound by the arbitration provision. The judgment of the district court was affirmed. View "Jim Rose v Mercedes-Benz USA, LLC" on Justia Law

Two students enrolled at a private university in California during early 2020, when the COVID-19 pandemic prompted widespread campus closures. In accordance with local lockdown orders, the university transitioned from in-person to online instruction in March 2020. Prior to the Fall 2020 semester, the university communicated with students about its intention to return to in-person education but made clear that such plans depended on approval from local authorities. Ultimately, the university continued remote instruction. The students remained enrolled and later graduated.The students filed suit in the Superior Court of Orange County, alleging breach of contract, unjust enrichment, and unfair business practices. They argued that the university had made an enforceable promise to provide in-person education, citing various university publications, course listings, policies, and statements about on-campus experiences. They sought a partial tuition refund and raised alternative claims regarding unfair or unlawful representations. The university moved for summary judgment, asserting that it had not made any specific promise to provide in-person instruction and that its statements reflected only general expectations. The Superior Court granted summary judgment for the university, relying on Berlanga v. University of San Francisco and finding no triable issue of material fact regarding any misrepresentation.The California Court of Appeal, Fourth Appellate District, Division Three, reviewed the case and affirmed the judgment. The court held that the university’s statements and practices did not constitute sufficiently specific enforceable promises of in-person education under California law. The court found that only specific, explicit promises are enforceable in the student-university relationship, and none were present here. The court also rejected the students’ unjust enrichment and unfair business practices claims. The judgment in favor of the university was affirmed, and the university was awarded costs on appeal. View "Grant v. Chapman University" on Justia Law

An individual seeking to refinance his mortgage visited a website that offers mortgage information and referrals to affiliated lenders. During three separate visits, he entered personal information and clicked buttons labeled “Calculate” or “Calculate your FREE results.” Immediately below these buttons, the website displayed language in small font stating that clicking would constitute consent to the site’s Terms of Use, which included a mandatory arbitration provision and permission to be contacted by the site or affiliates. The Terms of Use were accessible via a hyperlinked phrase. After using the site, the individual was matched with a particular lender but did not pursue refinancing. Later, he received multiple unwanted calls from the lender and filed a class-action lawsuit under the Telephone Consumer Protection Act, alleging violations such as calling numbers on the Do Not Call registry.The United States District Court for the Eastern District of Michigan initially dismissed the complaint on the merits and denied the lender’s motion to compel arbitration as moot. Upon realizing the arbitration issue should have been decided first, the court reopened the case but found no enforceable agreement to arbitrate existed, denying the motion to compel arbitration. The court also denied reconsideration and allowed the plaintiff to amend his complaint. The lender appealed the denial of arbitration.The United States Court of Appeals for the Sixth Circuit reviewed the denial de novo. It held that, under California law, the website provided reasonably conspicuous notice that clicking the buttons would signify assent to the Terms of Use, including arbitration. The court found that the plaintiff’s conduct objectively manifested acceptance of the offer, forming a binding arbitration agreement. The court also concluded that the agreement was not invalid due to unspecified procedural details and that questions of arbitrability were delegated to the arbitrator. The Sixth Circuit reversed the district court’s decision and remanded for further proceedings. View "Dahdah v. Rocket Mortgage, LLC" on Justia Law

Taylor L. Wood, her husband, and her son received medical care from physicians employed by Intermountain Emergency Physicians, PLLC (IEP). The resulting medical debt was assigned to Medical Recovery Services, LLC (MRS) for collection. After Wood’s attorneys alleged violations of state law, the Woods and IEP entered into a settlement that discharged the debt and provided payment to the Woods. Nevertheless, MRS later sued Wood to collect the same debt. Wood responded by counterclaiming and bringing IEP into the case as a third-party defendant, relying on the settlement agreement. MRS dismissed its complaint upon learning of the prior settlement, and all claims were eventually dismissed by the court.After judgment was entered, both sides sought a determination of the prevailing party and an award of attorney fees. The District Court of the Seventh Judicial District, Bingham County, found that Wood was the prevailing party over MRS and ordered MRS to pay Wood’s costs and attorney fees, concluding that MRS’s complaint was frivolous due to lack of proper investigation and communication regarding the settlement. MRS and IEP filed a first motion for reconsideration of the fees order, which was denied. They then filed a second motion for reconsideration, also denied, and subsequently appealed.The Supreme Court of the State of Idaho reviewed the case. It held that it lacked jurisdiction to review the district court’s order awarding costs and attorney fees to Wood because MRS and IEP’s notice of appeal from that order was untimely under Idaho Appellate Rule 14(a). The court did have jurisdiction to review the denial of the second motion for reconsideration, but because MRS and IEP failed to provide argument or authority on that issue, they waived it. The Supreme Court affirmed the district court’s denial of the second motion for reconsideration. View "Medical Recovery Services, LLC v. Wood" on Justia Law

Daevieon Towns purchased a new Hyundai Elantra in 2016, and over the next 19 months, the car required multiple repairs for alleged electrical and engine defects. In March 2018, either Towns or his wife, Lashona Johnson, requested that Hyundai buy back the defective vehicle. Before Hyundai acted, the car was involved in a collision, declared a total loss, and Johnson’s insurance paid her $14,710.91.Towns initially sued Hyundai Motor America in the Superior Court of Los Angeles County for breach of express warranty under the Song-Beverly Consumer Warranty Act. As trial approached, Towns amended his complaint to add Johnson as a plaintiff, arguing she was the primary driver and responsible for the vehicle. The trial court allowed the amendment, finding Johnson was not a buyer but permitted her to proceed based on its interpretation of Patel v. Mercedes-Benz USA, LLC. At trial, the jury found for Towns and Johnson, awarding damages and civil penalties. However, the court reduced the damages by the insurance payout and adjusted the prejudgment interest accordingly. Both parties challenged the judgment and costs in post-trial motions.The California Court of Appeal, Second Appellate District, Division Four, reviewed the case. It held that only a buyer has standing under the Act, so Johnson could not be a plaintiff. The court also held that third-party insurance payments do not reduce statutory damages under the Act, following the Supreme Court’s reasoning in Niedermeier v. FCA US LLC. Furthermore, prejudgment interest is available under Civil Code section 3288 because Hyundai’s statutory obligations do not arise from contract. The court affirmed in part, reversed in part, and remanded for the trial court to enter a modified judgment and reconsider costs. View "Towns v. Hyundai Motor America" on Justia Law

A veteran and his spouse obtained a VA-guaranteed loan to purchase a home. After the veteran’s employment was disrupted due to the U.S. withdrawal from Afghanistan, the couple experienced financial hardship and defaulted on their mortgage. The lender, a bank, initiated foreclosure proceedings. The couple attempted to reinstate their mortgage by tendering the full amount to bring the loan current, as provided by the mortgage contract, but allege that the bank and its foreclosure law firm failed to accept their payment or provide a means for payment. The property was sold to third-party purchasers at a foreclosure sale for more than the outstanding loan balance. The couple claims they did not receive adequate notice or an opportunity to exercise their statutory right of redemption.The third-party purchasers filed an ejectment action in Madison Circuit Court. The couple defended against the action and brought counterclaims against both the purchasers and the bank, alleging breach of good faith and fair dealing, breach of contract, wrongful foreclosure, unjust enrichment, and seeking declaratory relief. The trial court dismissed all claims against the bank and the third-party purchasers and granted summary judgment on the ejectment. The couple amended their pleadings, but the trial court again dismissed all claims. They appealed to the Supreme Court of Alabama. During the appeal, they settled with the third-party purchasers, leaving only their claims against the bank.The Supreme Court of Alabama held that Alabama law does not recognize an independent cause of action for breach of the duty of good faith and fair dealing and affirmed dismissal of that claim. However, the Court found that the couple adequately pleaded claims for breach of contract (due to the bank’s alleged refusal to allow reinstatement), wrongful foreclosure, and unjust enrichment. The Court reversed dismissal of those claims and remanded the case for further proceedings. View "Laborde v. Citizens Bank, N.A." on Justia Law

A commercial landlord leased property in downtown Boston to a restaurant operator. As part of their lease agreement, the landlord sold the restaurant a liquor license for one dollar, with the understanding that the license would be transferred back to the landlord for one dollar at the end of the lease. The lease included a provision prohibiting the restaurant from pledging the liquor license as collateral for any loan without the landlord’s written consent. Despite this, before the lease ended, the restaurant pledged the license to its principal as collateral for a loan. When the landlord discovered this, it terminated the lease and demanded the return of the license.The landlord and its related entities filed suit in the Massachusetts Superior Court, alleging breach of contract, unfair or deceptive business practices under General Laws c. 93A, and conversion. The Superior Court granted partial summary judgment for the landlord on the contract claims, finding the anti-pledge provision enforceable and the pledge a default. After a bench trial, the court found for the landlord on the c. 93A and conversion claims, awarding treble damages, attorney's fees, and costs. The defendants appealed these decisions.The Supreme Judicial Court of Massachusetts reviewed the case after transferring it from the Appeals Court. The Supreme Judicial Court held that the anti-pledge provision did not violate public policy or state law and was therefore enforceable. The court affirmed that the principal’s conduct in falsely affirming to regulatory authorities that the pledge did not violate any agreements constituted willful and knowing unfair or deceptive conduct under c. 93A. However, while the court affirmed the breach of contract claim, it reversed the conversion judgment, finding that the landlord did not have actual or immediate right to possession of the license at the relevant time. The award of attorney's fees and costs was affirmed. View "Nicosia v. Burns, LLC" on Justia Law