Justia Contracts Opinion Summaries

This case arose from a construction defect suit brought by a number of homeowners (Petitioners) against their homebuilder and general contractor, Lennar Carolinas, LLC (Lennar). Lennar moved to compel arbitration, citing the arbitration provisions in a series of contracts signed by Petitioners at the time they purchased their homes. Petitioners pointed to purportedly unconscionable provisions in the contracts generally and in the arbitration provision specifically. Citing a number of terms in the contracts, and without delineating between the contracts generally and the arbitration provision specifically, the circuit court denied Lennar's motion to compel, finding the contracts were grossly one-sided and unconscionable and, thus, the arbitration provisions contained within those contracts were unenforceable. The court of appeals reversed, explaining that the United States Supreme Court's holding in Prima Paint Corp. v. Flood & Conklin Manufacturing Co. forbade consideration of unconscionable terms outside of an arbitration provision (the Prima Paint doctrine). The court of appeals found the circuit court's analysis ran afoul of the Prima Paint doctrine as it relied on the oppressive nature of terms outside of the arbitration provisions. While the South Carolina Supreme Court agreed that the circuit court violated the Prima Paint doctrine, it nonetheless agreed with Petitioners and found the arbitration provisions, standing alone, contained a number of oppressive and one-sided terms, thereby rendering the provisions unconscionable and unenforceable under South Carolina law. The Court further declined to sever the unconscionable terms from the remainder of the arbitration provisions, as "it would encourage sophisticated parties to intentionally insert unconscionable terms—that often go unchallenged—throughout their contracts, believing the courts would step in and rescue the party from its gross overreach. ... Rather, we merely recognize that where a contract would remain one-sided and be fragmented after severance, the better policy is to decline the invitation for judicial severance." View "Damico v. Lennar Carolinas, LLC et al." on Justia Law

A group of public servants who had contacted Navient for help repaying their loans (collectively, “Plaintiffs”) filed a putative class action lawsuit, alleging that Navient had not “lived up to its obligation to help vulnerable borrowers get on the best possible repayment plan and qualify for PSLF.”   Navient moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, which the district court granted in part, dismissing all claims except “the claim brought under New York’s General Business Law Section 349”. The district court certified a class for settlement purposes under Federal Rule of Civil Procedure 23(b)(2) and approved the settlement as “fair, reasonable, adequate,” and “in the best interest of the Settlement Class as a whole.”   Two objectors now appeal that judgment, arguing that the district court erred in certifying the class, approving the settlement, and approving service awards of $15,000 to the named Plaintiffs. The Second Circuit affirmed concluding that the district court did not abuse its discretion in making any of these determinations. The court explained that here, the amended complaint plausibly alleged that the named Plaintiffs were likely to suffer future harm because they continued to rely on Navient for information about repaying their student loans. At least six of the named Plaintiffs continue to have a relationship with Navient. That is enough to confer standing on the entire class. Further, the court explained individual class members [in fact] retain their right to bring individual lawsuits,” and the settlement does not prevent absent class members from pursuing monetary claims. View "Hyland v. Navient Corporation" on Justia Law

OneMain, a non-bank finance company, loaned Zirpoli $6,200.08, to be repaid at a rate of 26.91% (total $11,364.35). The loan was issued under the Consumer Discount Company Act (CDCA), a consumer protection statute, which creates an exception to Pennsylvania’s usury law. The loan is governed by a disclosure statement, a security agreement, and an arbitration agreement. Later, OneMain sold delinquent accounts to Midland, including Zirpoli’s loan. Midland sued Zirpoli but later dismissed the suit and undertook collection efforts.Zirpoli filed a class action, alleging that Midland’s collection activities constituted an unlawful attempt to collect the loan because Midland does not have a CDCA license and never obtained nor requested approval from the Department of Banking. Midland was, therefore, not lawfully permitted to purchase the loan. Midland moved to compel arbitration. The court denied the motion, focusing on the validity of the assignment from OneMain and Midland. The Third Circuit vacated. The ultimate illegality of a contract does not automatically negate the parties’ agreement that an arbitrator should resolve disputes arising from the contract. The parties to the loan clearly agreed to arbitrate the issue of arbitrability. The arbitration agreement provides that an arbitrator shall resolve the arbitrability of defenses to enforcement, including alleged violations of state usury laws. View "Zirpoli v. Midland Funding LLC" on Justia Law

In 2001, Levy, a 37-year-old single mother of two, purchased a 20-year term life insurance policy from West Coast, with a $3 million benefit payable upon her death to her sons. In January 2019, Benita—in deteriorating physical and mental health—missed a payment. Approximately five months later, she died, having never paid the missed premium. West Coast declared the policy forfeited.Levy's sons filed suit, alleging breach of contract and that a late-2018 missed-payment notice failed to comply with the Illinois Insurance Code, which forbids an insurer from canceling a policy within six months of a policyholder’s failure to pay a premium by its due date (calculated to include a 31-day grace period) unless the insurer provided notice stating “that unless such premium or other sums due shall be paid to the company or its agents the policy and all payments thereon will become forfeited and void, except as to the right to a surrender value or paid-up policy as provided for by the policy.” West Coast’s 2018 notice incorporated much of the statutory language. The Seventh Circuit affirmed the dismissal of the complaint. The Notice adequately alerted policyholders to the consequences of nonpayment; there was no need for the Notice to mention the company’s agents as alternate payees. View "Levy v. West Coast Life Insurance Co." on Justia Law

Defendant, a neurosurgeon, chose to use implants distributed by DS Medical, a company wholly owned by his fiancée. Physicians in other practices grew suspicious and filed various claims under the False Claims Act. The jury returned a verdict for the government on two of the three claims. The district court then awarded treble damages and statutory penalties in the amount of $5,495,931.22. Following the verdict, the government moved to dismiss its two remaining claims without prejudice, see Fed. R. Civ. P. 41(a)(2), on the ground that any recovery would be “smaller and duplicative of what the [c]ourt ha[d] already awarded.”   The Eighth Circuit reversed and remanded for a new trial. The court explained that are several ways to prove that a claim is “false or fraudulent” under the False Claims Act. One of them is to show that it “includes items or services resulting from a violation” of the anti-kickback statute. This case required the court to determine what the words “resulting from” mean. The court concluded that it creates a but-for causal requirement between an anti-kickback violation and the “items or services” included in the claim. Thus, the court reversed and remanded because district court did not instruct the jury along these lines. View "United States v. Midwest Neurosurgeons, LLC, et al" on Justia Law

Plaintiff entered into a reverse mortgage agreement with Reverse Mortgage Solutions, Inc. (“RMS”). In violation of the Truth in Lending Act (“TILA”), RMS failed to disclose certain information at closing. Section 1635(b) of TILA imposes certain obligations on a creditor, like RMS, after it receives a notice of rescission, but RMS did not comply with those obligations either. Plaintiff sued RMS for, among other things, rescission and failing to honor her rescission rights under TILA.   A jury returned a verdict for RMS, finding that RMS did not fail to honor Plaintiff’s attempt to rescind the loan. However, the district court issued judgment as a matter of law for Plaintiff holding that RMS violated Section 1635(b)’s requirements. It also held that Plaintiff was not required to tender or return, the loan proceeds to RMS.   The Fourth Circuit vacated the district court’s judgment as a matter of law and remanded. The court explained that the district court erred in granting judgment as a matter of law to Plaintiff on the Rescission Count. In response to RMS’s failure to voluntarily unwind the loan or otherwise respond to that notice as required by Section 1635(b), Plaintiff had a right to sue RMS to obtain rescission relief under TILA. But neither Section 1635(b) nor any other provision of TILA provides that the failure of a lender to voluntarily unwind a loan or respond to a notice of intent to rescind allows a borrower to avoid tendering the loan proceeds as part of rescission. View "Teresa Lavis v. Reverse Mortgage Solutions Inc" on Justia Law

American Express National Bank (“AmEx”) filed suit for breach of contract in Mississippi state court to recover $2,855.74 of unpaid credit card debt incurred on Plaintiff's account. Plaintiff contended an unknown person incurred this debt fraudulently. Plaintiff then filed Fair Credit Reporting Act (“FCRA”) claims against AmEx and other defendants in Mississippi state court. The district court denied AmEx’s motion to compel arbitration.   The Fifth Circuit vacated the decision of the district court and remanded for reconsideration in the first instance in light of Forby v. One Techs., L.P and Morgan v. Sundance, Inc. The court held that these cases were decided on the same day and after the district court’s ruling. Forby clarified the test for waiver by a party of the right to compel arbitration and reiterated that waiver analysis occurs on a claim-by-claim basis. In addition, Morgan addressed this and other sister circuits’ tests for waiver by a party of the right to compel arbitration. The court explained that although it can apply subsequent precedent to cases before it, “[a]s a court for review of errors, we are not to decide facts or make legal conclusions in the first instance." Thus, the court’s task is to review the actions of a trial court for claimed errors. View "Barnett v. American Express National" on Justia Law

The Supreme Court reversed the decision of the court of appeals upholding that trial court's determination that the plaintiff homeowner's award of attorneys fees and costs under Tenn. Code Ann. 20-12-119(c) was limited to those incurred after the date the defendant contractor filed an amended countercomplaint, holding that the lower courts erred.Plaintiff and Defendant entered into a contract for the renovation of a residence. Plaintiff later filed a complaint alleging breach of contract and violation of the Tennessee Consumer Protection Act. Defendant filed an amended countercomplaint asserting breach of contract. The trial court dismissed all of Plaintiff's claims and then dismissed the countercomplaint. On appeal, Plaintiff challenged the attorney fee and costs award granted by the trial court. The court of appeals affirmed. The Supreme Court vacated the trial court's award of attorney fees and costs, holding that the fees and costs recoverable by Plaintiff in connection with the dismissal of Defendant’s breach of contract claim are not limited to those incurred after the amended countercomplaint was actually filed. View "Donovan v. Hastings" on Justia Law

Plaintiff appealed a summary judgment entered in favor of Defendant in her lawsuit for damages against Defendant based on his alter ego liability for a $157,370 judgment against a corporation. Plaintiff claimed that Magnolia Funding, Inc., the subject of a prior lawsuit that provided the original loan, and Magnolia Home Loans, Inc. “were the same company”; and that Defendant was “the sole owner, officer, and director of each.” Magnolia Funding closed when Magnolia Home Loans got up and running.   The Second Appellate district concluded, among other things, that (1) the trial court erred by granting summary judgment in favor of the corporation; there are triable issues of fact concerning Defendant’s alter ego liability, and (2) Plaintiff’s civil action does not violate Defendant’s right to due process.   The court explained that under the alter ego doctrine, the corporate veil may be lifted to show the corporate form is fiction and determine who controls the corporate entity and who is liable for its debts. Courts look to the totality of circumstances to determine who actually owns or controls the corporate entity and who is using it as “a mere shell or conduit” for his or her own personal interests. When Magnolia Funding, Inc. dissolved, Magnolia Home Loans, Inc. received its remaining physical assets. At the end of the fiscal year 2009, Magnolia Home Loans, Inc. held cash and all that money was paid to Defendant. This is a triable issue of fact concerning Escamilla’s alter ego liability. View "Lopez v. Escamilla" on Justia Law

The Supreme Court affirmed the judgment of the court of appeal affirming the judgment of the trial court granting Plaintiff's postural motion seeking attorney's fees in the amount of $169,602 under the Song-Beverly Consumer Warranty Act, Cal. Civ. Code 1795, subd. (d), after awarding her $21,957.25 in damages on her claim for breach of the implied warranty of merchantability, holding that there was no error.Plaintiff purchased a used vehicle from a dealership pursuant to an installment sales contract that was later assigned to TD Auto Finance (TDAF). Plaintiff filed suit against the dealership and TDAF, alleging misconduct in the sale of the car. A jury found that Defendants breached the implied warranty of merchantability under the Song-Beverly Act and awarded damages and attorney's fees under the Song-Beverly Act. The court of appeal affirmed. The Supreme Court affirmed, holding that recovery under the Federal Trade Commission's Holder Rule does not limit the award of attorney's fees where, as a here, a buyer seeks fees from a holder under a state prevailing party statute. View "Pulliam v. HNL Automotive, Inc." on Justia Law