Justia Contracts Opinion Summaries

Articles Posted in Consumer Law
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Michigan First Credit Union reimbursed its customers for unauthorized electronic fund transfers resulting from a SIM Swap scam involving T-Mobile USA, Inc. Michigan First sought to recover these funds from T-Mobile, claiming indemnification or contribution under the Electronic Fund Transfer Act (EFTA) and state law. The district court dismissed the complaint, ruling that Michigan First failed to state a claim for indemnification or contribution under both the EFTA and state law.The United States District Court for the Eastern District of Michigan dismissed Michigan First’s claims, finding no basis for indemnification or contribution under the EFTA or state law. Michigan First appealed, arguing that the EFTA implies a right to indemnification or contribution, that the Michigan Electronic Funds Transfer Act (MEFTA) is not preempted by the EFTA, and that its state common-law indemnification claim should stand.The United States Court of Appeals for the Sixth Circuit reviewed the case de novo. The court held that the EFTA does not imply a right to indemnification or contribution for financial institutions, as the statute is designed to protect consumers, not financial institutions. The court also found that the EFTA preempts the MEFTA and any state common-law claims for indemnification or contribution, as allowing such claims would conflict with the EFTA’s comprehensive regulatory scheme. Consequently, the Sixth Circuit affirmed the district court’s dismissal of Michigan First’s complaint. View "Michigan First Credit Union v. T-Mobile USA, Inc." on Justia Law

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Samuel Boytor, an engineer and businessman, and his wife Carol, defaulted on loans they had personally guaranteed. They entered into a settlement agreement with EFS Bank’s successor, restructuring their debt into three new promissory notes secured by mortgages on their properties. PNC Bank, which eventually held these notes, filed a complaint in 2018 against the Boytors for defaulting on two of the notes. PNC sought foreclosure on the Boytors’ residential property and a money judgment for the nonpayment of a separate note.The United States District Court for the Northern District of Illinois held a bench trial and found in favor of PNC on both counts. The court ordered foreclosure on the Boytors’ residential property and issued a deficiency judgment after the property was sold. The Boytors appealed the decision.The United States Court of Appeals for the Seventh Circuit affirmed the district court’s judgment. The appellate court held that PNC had established a prima facie case for foreclosure by presenting the mortgage and underlying note. The Boytors’ affirmative defenses, including lack of consideration and payment of the notes, were rejected. The court found that the $203,000 note was supported by consideration and that the Boytors had not paid the note. Additionally, the court determined that the $200,000 note was not paid, and the release of the mortgage did not extinguish the underlying debt. The court also rejected the Boytors’ argument of accord and satisfaction, finding no evidence of a new arrangement to pay less than the outstanding debt. View "PNC Bank, National Association v. Boytor" on Justia Law

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John Craig First purchased an agricultural combine from Rolling Plains Implement Company, which was manufactured by AGCO Corporation. First was told the combine was part of AGCO’s Certified Pre-Owned Program, had roughly 400 hours of use, and had never been to the field. However, these representations were false; the combine was not certified and had over 1,200 hours of use. After experiencing numerous issues with the combine, First discovered in 2019 that it had an extensive repair history and over 900 hours of use. He then filed a lawsuit against Rolling Plains, AGCO Corporation, AGCO Service, AGCO Finance, and other related entities.Initially, First filed his lawsuit in the District Court of Oklahoma County, but it was removed to federal court in Oklahoma, which dismissed the case without prejudice and transferred it to the Northern District of Texas. First amended his complaint multiple times, asserting claims of fraud, breach of warranty, and failure of essential purpose. The district court dismissed the fraud claims against AGCO Corporation, AGCO Service, and AGCO Finance for lack of particularity and granted summary judgment in favor of AGCO Finance on the warranty claims. The case proceeded to trial on the remaining claims, where the jury found that First knew or should have known of the fraud by April 13, 2017, and awarded him $96,000 in damages. However, the district court entered judgment in favor of Rolling Plains based on the statute of limitations.The United States Court of Appeals for the Fifth Circuit reviewed the case. It vacated the district court’s judgment as a matter of law in favor of Rolling Plains, finding insufficient evidence to support the jury’s selected date for the statute of limitations. The case was remanded for retrial on when First’s cause of action accrued. The appellate court affirmed the dismissal of fraud claims against AGCO Corporation, AGCO Service, and AGCO Finance, and upheld the summary judgment in favor of AGCO Finance on the warranty claims. View "First v. Rolling Plains Implement Co." on Justia Law

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Plaintiffs William Pace and Robert Walters leased apartments at Hamilton Cove, a complex in Weehawken, New Jersey, based on advertisements claiming 24/7 security. After moving in, they discovered that the security was not as advertised. They filed a complaint in March 2022, alleging common law fraud and violations of the Consumer Fraud Act (CFA), seeking to certify a class of similarly affected tenants. The leases included a class action waiver, which defendants argued should prevent the class action. Plaintiffs contended the leases were unconscionable contracts of adhesion.The trial court denied defendants' motion to dismiss, finding the complaint sufficiently pled fraud. The Appellate Division affirmed, holding that class action waivers in contracts without mandatory arbitration provisions are unenforceable as a matter of public policy. The court distinguished this case from AT&T Mobility LLC v. Concepcion, which upheld class action waivers in arbitration agreements under the Federal Arbitration Act (FAA). The Appellate Division emphasized New Jersey's public policy favoring class actions for consumer protection.The Supreme Court of New Jersey reviewed the case and reversed the Appellate Division's decision. The Court held that class action waivers in consumer contracts are not inherently contrary to public policy and can be enforceable unless found to be unconscionable or invalid under general contract principles. The Court found that the class action waiver in the lease agreements was clear and unambiguous, and the leases were not unconscionable. Therefore, the class action waiver was enforceable, and plaintiffs must pursue their claims individually. The case was remanded for further proceedings consistent with this opinion. View "Pace v. Hamilton Cove" on Justia Law

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This case involves a dispute over a real estate and construction contract. The plaintiffs, Myles Davis and Janelle Dahl, sued their homebuilder, Blast Properties, Inc., and Tyler Bosier, alleging breach of contract, fraud, and violations of the Idaho Consumer Protection Act. The plaintiffs sought to amend their complaint to include a prayer for relief seeking punitive damages. The U.S. District Court granted the plaintiffs' motion to amend their complaint, but certified a question to the Supreme Court of the State of Idaho due to inconsistencies in the interpretation of Idaho Code section 6-1604(2), which prohibits claimants from including a prayer for relief seeking punitive damages in their initial pleading.The U.S. District Court asked the Supreme Court of the State of Idaho to determine the proper means a trial court must apply when considering a motion to amend a pleading to include a prayer for relief seeking punitive damages pursuant to Idaho Code section 6-1604(2). The Supreme Court of the State of Idaho rephrased the question to clarify the obligations of a trial court under Idaho Code section 6-1604(2) when ruling upon a motion to amend a complaint or counterclaim to include a prayer for relief seeking punitive damages.The Supreme Court of the State of Idaho held that section 6-1604(2) requires the trial court to conduct a careful examination of the evidence submitted by the moving party in support of its motion to amend and the arguments made to determine whether there is a "reasonable probability" that the evidence submitted is: (1) admissible at trial; and (2) "sufficient" to support an award of punitive damages. The word "sufficient" means that the claim giving rise to the request for punitive damages must be legally cognizable and the evidence presented must be substantial. The court clarified that the clear and convincing evidentiary standard is the standard for a jury, not the trial court when it is ruling on a motion to amend a pleading to include a prayer for relief seeking punitive damages. View "Davis v. Blast" on Justia Law

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In this case, plaintiffs Brandi Stiles and Abel Gorgita purchased a 2011 Kia Optima in April 2013. The car, manufactured and distributed by Kia Motors America, Inc., was sold with express warranties still in effect from the original sale. However, the car had serious defects, including issues with the transmission, electrical system, brakes, engine, suspension, and steering. Despite multiple attempts, Kia was unable to repair these defects. The plaintiffs argued that Kia failed to replace the car or make restitution as required under the Song-Beverly Consumer Warranty Act.The trial court sustained Kia's demurrer, arguing that the remedies sought by the plaintiffs under the Song-Beverly Act only apply to new motor vehicles. The court relied on a previous case, Rodriguez v. FCA US, LLC, which held that a used motor vehicle with an unexpired warranty is not a "new motor vehicle" under the Song-Beverly Act. The court rejected another case, Jensen v. BMW of North America, Inc., which held that a previously owned motor vehicle with an unexpired warranty qualifies as a "new motor vehicle" under the Song-Beverly Act.The Court of Appeal of the State of California Second Appellate District Division Six reversed the trial court's decision. The court held that a previously owned motor vehicle purchased with the manufacturer’s new car warranty still in effect is a “new motor vehicle” as defined by section 1793.22, subdivision (e)(2) of the Song-Beverly Act. Thus, the replace or refund remedy of section 1793.2, subdivision (d)(2) applies. The court rejected Kia's arguments and affirmed the interpretation of the Song-Beverly Act in Jensen v. BMW of North America, Inc. The court also modified the opinion to clarify the interpretation of the implied warranty provisions. View "Stiles v. Kia Motors America, Inc." on Justia Law

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In April 2013, Brandi Stiles and Abel Gorgita purchased a 2011 Kia Optima, which was manufactured and distributed by Kia Motors America, Inc. At the time of purchase, some of Kia's original warranties were still in effect, including the basic and drivetrain warranties. The car developed serious defects covered by the warranties, including issues with the transmission, electrical system, brakes, engine, suspension, and steering. Despite multiple attempts, Kia was unable to repair the defects. Stiles and Gorgita alleged that Kia failed to replace the car or make restitution as required under the Song-Beverly Consumer Warranty Act.Kia demurred to the first amended complaint, arguing that the remedies sought under the Song-Beverly Act apply only to new motor vehicles, and the car purchased by Stiles and Gorgita was not a "new motor vehicle" as defined in the Act. The trial court sustained Kia's demurrer, relying on a previous case, Rodriguez v. FCA US, LLC, which held that a used motor vehicle with an unexpired warranty is not a "new motor vehicle" under the Song-Beverly Act.The Court of Appeal of the State of California Second Appellate District Division Six reversed the trial court's decision. The court held that a previously owned motor vehicle purchased with the manufacturer’s new car warranty still in effect is a “new motor vehicle” as defined by the Song-Beverly Act. Therefore, the replace or refund remedy of the Act applies. The court rejected Kia's argument that the Act's definition of a "new motor vehicle" should be limited to vehicles that have never been previously sold to a consumer and come with full express warranties. The court also rejected Kia's argument that Stiles and Gorgita's interpretation of the Act conflicts with its implied warranty provisions. View "Stiles v. Kia Motors America, Inc." on Justia Law

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The case involves a group of bettors who sued Churchill Downs, Inc., and trainers Robert Baffert and Bob Baffert Racing, Inc., after the horse they bet on, Medina Spirit, was disqualified from the 2021 Kentucky Derby due to a failed post-race drug test. The bettors claimed that they would have won their bets under the new order of finish after Medina Spirit's disqualification. However, under Kentucky law, only the first order of finish marked "official" counts for wagering purposes. The plaintiffs brought claims for negligence, breach of contract, violation of the Kentucky Consumer Protection Act, and unjust enrichment.The case was initially heard in the United States District Court for the Western District of Kentucky, which granted the defendants' motions to dismiss and denied the plaintiffs leave to amend the complaint. The court found that the plaintiffs' claims were based on the theory that they had "unpaid winning wagers," but under Kentucky law, the first official order of finish is final. Therefore, the plaintiffs' wagers were lost, and the complaint failed to state a claim upon which relief could be granted.The case was then appealed to the United States Court of Appeals for the Sixth Circuit. The appellate court affirmed the lower court's decision, agreeing that the plaintiffs' claims were based on the theory that they had "unpaid winning wagers." However, under Kentucky law, the first official order of finish is final for wagering purposes. Therefore, the plaintiffs' wagers were lost, and the complaint failed to state a claim upon which relief could be granted. The court also found that the proposed amendment to the complaint did not cure this flaw, so the lower court properly denied leave to amend. View "Mattera v. Baffert" on Justia Law

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The case involves a dispute between a bank and a homeowner over a foreclosure action. The bank sought to foreclose on a mortgage after the homeowner defaulted on a promissory note secured by the mortgage. The mortgage agreement included a provision authorizing the bank to purchase force placed insurance coverage for the property if the homeowner failed to maintain adequate coverage. The homeowner alleged that the bank was involved in an undisclosed kickback scheme with an insurance provider, which led to him being charged more than the cost of purchasing the force placed coverage, contrary to the provisions of the mortgage agreement and certain representations the bank had made to him. The bank filed a motion to strike the special defenses and the counterclaim, which the trial court granted in part. The trial court subsequently granted the bank’s motion for summary judgment as to liability and rendered judgment of foreclosure by sale, from which the homeowner appealed.The Supreme Court of Connecticut denied the bank's motion to dismiss the appeal, concluding that the filed rate doctrine, as applied by the federal courts, did not affect the court’s subject matter jurisdiction over this appeal. The court also found that the trial court improperly struck the homeowner’s special defenses of unclean hands and breach of the implied covenant of good faith and fair dealing. The court reasoned that the homeowner's allegations were directly related to the bank's enforcement of the provision of the mortgage agreement authorizing the bank to purchase force placed insurance, and the alleged effect of the bank’s conduct in enforcing that provision, that it wrongfully increased the homeowner’s overall debt, provided a sufficient nexus to the foreclosure action. The court reversed the trial court’s judgment and remanded the case for further proceedings. View "M&T Bank v. Lewis" on Justia Law

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A group of individuals, including a minor, filed a class action lawsuit against Warner Bros. Entertainment, Inc. for alleged misrepresentations related to the mobile application Game of Thrones: Conquest (GOTC). The plaintiffs claimed that Warner Bros. engaged in false and misleading advertising within the game. In response, Warner Bros. moved to compel arbitration of all claims based on the GOTC Terms of Service, which users agree to by tapping a “Play” button located on the app’s sign-in screen. The district court denied Warner Bros.' motion, finding that the notice of the Terms of Service was insufficiently conspicuous to bind users to them.The case was appealed to the United States Court of Appeals for the Ninth Circuit. The lower court had found that Warner Bros. failed to provide reasonably conspicuous notice of its Terms of Service, thus denying the motion to compel arbitration. The district court focused on whether the context of the transaction put the plaintiffs on notice that they were agreeing to the Terms of Service, concluding that the app did not involve a continuing relationship that would require some terms and conditions.The Ninth Circuit Court of Appeals reversed the district court's decision. The appellate court held that the district court erred in finding that Warner Bros. failed to provide reasonably conspicuous notice. The court found that the context of the transaction and the placement of the notice were both sufficient to provide reasonably conspicuous notice. The court also rejected the plaintiffs' argument that the arbitration agreement was unconscionable due to its ban on public injunctive relief. The court concluded that the unenforceability of the waiver of one’s right to seek public injunctive relief did not make either this provision or the arbitration agreement unconscionable or otherwise unenforceable. The case was remanded for further proceedings. View "KEEBAUGH V. WARNER BROS. ENTERTAINMENT INC." on Justia Law