Justia Contracts Opinion Summaries

An investment fund specializing in gems and minerals filed for bankruptcy in October 2019. Prior to this, one of the fund’s managing members, through his own companies, had engaged a law firm to represent him and his separate business interests in connection with federal investigations and anticipated arbitration involving the fund and its leadership. The law firm’s engagement letters were addressed to the individual and his other company, not the fund itself, and did not state that the fund was responsible for payment. Some of the legal work benefited all respondents, including the fund, and the fund issued two checks to the law firm. However, a significant balance remained unpaid.During the bankruptcy proceedings, the law firm filed a claim against the fund for unpaid legal fees. The Official Committee of Equity Security Holders, appointed to represent the fund’s equity holders, objected, arguing the fund was not liable for the debt. The United States Bankruptcy Court for the Eastern District of Wisconsin granted summary judgment to the Equity Committee, finding the fund had no obligation to pay the law firm based on the evidence presented. The law firm appealed to the United States District Court for the Eastern District of Wisconsin, which affirmed the bankruptcy court’s decision.The United States Court of Appeals for the Seventh Circuit reviewed the district court’s affirmance de novo. The Seventh Circuit held that the law firm had not provided sufficient evidence of an enforceable promise by the fund to pay the legal fees, either as a primary obligor or under promissory estoppel. Additionally, the court found that neither Wisconsin’s statutory indemnification provision for LLC managers and members nor the fund’s operating agreement extended indemnification rights to the individual who had retained the law firm. The Seventh Circuit affirmed the district court’s judgment. View "Ballard Spahr LLP v Official Committee of Equity Security Holders" on Justia Law

A homeowner alleged that he hired a roofing company in 2011 to install a specific type of roof on his residence. After installation, problems with roof materials became apparent, including issues with a protective layer that remained unresolved despite multiple repair attempts by both the roofing company and the manufacturer over more than a decade. The homeowner asserted that these defects persisted, and that communication from the roofing company ceased in early 2024. As a result, he filed a lawsuit in Etowah County, Alabama, alleging breach of express and implied warranties, as well as negligent or wanton installation and repair, and sought damages.The roofing company moved to dismiss the lawsuit for improper venue, arguing that a forum-selection clause in a “Service Agreement” required all disputes to be heard in Madison County, Alabama. The company attached an unsigned and undated sample agreement to its motion, but did not produce a copy signed by the homeowner or any evidence that the homeowner had agreed to such a clause. The homeowner responded that he had never signed, nor was he aware of, the agreement submitted by the company and also challenged the clause’s reasonableness. The Etowah Circuit Court denied the company’s motion to dismiss for improper venue.The Supreme Court of Alabama reviewed the company’s petition for a writ of mandamus, which sought to compel the lower court to dismiss the case or transfer it to Madison County. The Supreme Court held that the company failed to meet its burden of proving that the forum-selection clause applied, as it did not present evidence linking the blank agreement to the parties’ actual contract. Therefore, the Supreme Court of Alabama denied the petition, concluding that the circuit court did not clearly err in refusing to dismiss or transfer the case. View "Ex parte Continental Roofing Company, LLC" on Justia Law

The case centers on a dispute involving a pharmaceutical company founded by the plaintiff, who also served as its CEO. The plaintiff obtained investment from a Canadian entity controlled by one of the defendants, who later became a director. The company entered into a profitable licensing agreement for a drug, and the plaintiff claims he was personally entitled to 30% of the profits based on an oral agreement. The investor and his affiliates, however, allege that the plaintiff wrongfully diverted corporate assets by taking this share. After disagreements arose, the investor replaced himself and another director on the board with officers from his own affiliates, who began investigating the alleged diversion. In response, the plaintiff initiated litigation, asserting that the investigation was a breach of fiduciary duty and that the investor and his affiliates acted in bad faith for their own benefit.Previously, the Court of Chancery of the State of Delaware was asked to consider several claims, including breach of fiduciary duty, civil conspiracy, and tortious interference against the investor, his affiliates, and the two new directors. The investor’s affiliate moved to dismiss for lack of personal jurisdiction, and the court found it had no jurisdiction over the affiliate. The court also examined whether it had jurisdiction over the investor for claims other than those related to his service as a director, finding it did not because the complaint failed to state a viable claim against him in that capacity.In the present decision, the Court of Chancery held that it lacked personal jurisdiction over the investor’s affiliate and over the investor in his non-director capacities, dismissing those claims without prejudice. The court further dismissed with prejudice the breach of fiduciary duty and conspiracy claims against the directors and the investor in his director capacity, finding no viable claims were stated. However, the court allowed the plaintiff’s claim for a declaratory judgment regarding his right to the profits from the drug to proceed against the company, provided an amended complaint is filed naming the company as a proper defendant. View "MacLaughlan v. Einheiber" on Justia Law

H.A.T., LLC entered into a bond-for-deed contract with Greenleaf Apartments, LLC to purchase three buildings in Portland for $1 million, with a down payment and monthly installments. H.A.T. took possession but would not receive title until the note was fully paid, and the parties executed additional agreements to address Greenleaf's concerns and clarify remedies for default. Over time, H.A.T. became delinquent in its payments, and Greenleaf lent additional funds to cover repairs after a series of casualty events. Despite proposals to consolidate debts and efforts to sell the property, H.A.T. remained in default. Greenleaf ultimately exercised its right under a memorandum agreement to terminate the contract without notice upon default, retaking possession of the property.H.A.T. then filed suit in the Maine Business and Consumer Docket, alleging various claims, including breach of contract and entitlement to insurance proceeds, while Greenleaf counterclaimed for breach of contract. The court dismissed claims against Greenleaf's counsel and, after a bench trial, ruled in favor of Greenleaf on all claims. The court found that H.A.T. had defaulted on payment obligations, that Greenleaf was justified in terminating the contract, and that H.A.T. was not entitled to insurance proceeds or a setoff. The final judgment awarded Greenleaf costs and attorney fees.On appeal, the Supreme Judicial Court of Maine affirmed the judgment. The Court held that H.A.T. breached the contract by missing payments, Greenleaf had no obligation to provide H.A.T. with insurance proceeds, and H.A.T. was not entitled to notice of a right to cure because the statutory notice provision for foreclosures did not apply to commercial purchasers like H.A.T. The court concluded the statute was intended to protect homeowners, not commercial investors. Judgment was affirmed. View "H.A.T., LLC v. Greenleaf Apartmetns, LLC" on Justia Law

The case concerns a failed sale of a bar and restaurant in Bismarck, North Dakota. Neil Galpin, as assignee of Galpin Entertainment, sought to recover a $100,000 earnest money deposit after Cantina Holdings, LLC and Clay Butte Holdings, LLC (the buyers) did not complete the purchase. The parties had executed a confidential offer letter, which required the deposit and stated it would become non-refundable after the buyer’s due diligence period expired, unless the buyer notified the seller of its intent not to proceed before that date. Later, the parties signed a standard form purchase agreement that both incorporated the confidential letter and included a conflicting, pre-printed provision stating that if financing failed after a certain date, the earnest money would be returned to the buyer. The transaction never closed, and Galpin Entertainment ultimately sold the property to someone else.The District Court of Burleigh County, South Central Judicial District, heard the case in a bench trial. The court concluded that the specially drafted provision in the confidential letter, rather than the standard form language in the purchase agreement, controlled the disposition of the earnest money. It found that the buyers did not properly exercise their right to terminate before the due diligence deadline and that Galpin did not breach the contract by failing to negotiate the contract for deed in good faith. Judgment was entered in favor of Neil Galpin for the earnest money, and the buyers’ counterclaims were denied.On appeal, the Supreme Court of the State of North Dakota affirmed the district court’s judgment. The Supreme Court held that, when conflicting contract provisions exist, specially drafted terms control over standard form language, especially where the parties who caused the uncertainty seek to benefit from it. The court also found no clear error in the district court’s finding that Galpin negotiated in good faith. View "Galpin v. Cantina Holdings" on Justia Law

A financial advisor sold her company to a buyer, with a portion of the purchase price to be paid up front and the remainder in quarterly installments. When the buyer failed to make the scheduled payments, the seller initiated arbitration through the Financial Industry Regulatory Authority (FINRA), as required by their agreement. The arbitration panel found the buyer in default and awarded damages to the seller. The buyer then sought to vacate the arbitration award in the Circuit Court for the City of Richmond, arguing that one of the arbitrators had “evident partiality” due to undisclosed past connections with the seller and her company.The circuit court reviewed the motion to vacate and applied the “evident partiality” standard as interpreted by the Fourth Circuit in ANR Coal Co., Inc. v. Cogentrix of N.C., Inc., and denied the motion, finding no clear evidence of bias. The buyer appealed to the Court of Appeals of Virginia, which affirmed the circuit court’s decision. The appellate court concluded that the arbitrator’s prior connections with the seller and her company were too remote and insubstantial to suggest partiality, and that the undisclosed interactions did not create an appearance of bias that would require vacatur of the award.The Supreme Court of Virginia reviewed the case to clarify the standard for “evident partiality” under the Virginia Uniform Arbitration Act. The court held that, to vacate an arbitration award for evident partiality, a party must objectively show that a reasonable person, knowing all relevant facts, would perceive the arbitrator’s conduct as obvious bias against that party. Applying this standard, the Supreme Court of Virginia found that the arbitrator’s remote and inconsequential past connections did not meet this threshold. The court affirmed the judgment of the Court of Appeals and remanded for further proceedings regarding attorney fees. View "Garofalo v. Di Vincenzo" on Justia Law

A physician employed by a medical group entered into an employment agreement that included a noncompete clause prohibiting him from working for a competing healthcare organization within a specified geographic area for one year after leaving his position. After learning that the physician planned to join a competitor, the employer warned him that doing so would violate his contract. Nevertheless, after his employment ended, the physician began working for the competing medical group, which was a subsidiary of a hospital authority created by statute. The employer then sued the physician for breach of contract and the competitor for tortious interference with contract.The Circuit Court of the City of Norfolk considered only the pleadings and granted the competitor’s plea of sovereign immunity, dismissing the action against it with prejudice. The court adopted the argument that, as a subsidiary of the hospital authority, the competitor automatically shared in the authority’s sovereign immunity and was therefore immune from suit.On appeal, the Supreme Court of Virginia reviewed the case de novo, accepting the facts alleged in the complaint as true. The Court held that a subsidiary or agent of an immune entity does not automatically share the principal’s sovereign immunity. Instead, whether a corporate agent shares in the principal’s immunity depends on the specific facts and circumstances, analyzed under a four-factor test articulated in prior Virginia cases. Because the record lacked sufficient facts to determine the competitor’s entitlement to immunity and because the competitor bore the burden of establishing such entitlement, the Supreme Court of Virginia concluded that the circuit court erred by sustaining the plea of sovereign immunity. The judgment was reversed and the case remanded for further proceedings. View "Sentara Medical Group v. Klena" on Justia Law

A tenant and her adult son rented a house in Arlington, Virginia, for a year. Several months into the lease, they noticed water leaking through a skylight and informed the landlord. The landlord and a contractor inspected the skylight and confirmed it was leaking, but no repairs were made. After a period of snow and rain, the tenant slipped on water that had accumulated from the leak, suffering significant injuries. She then sued the landlord, alleging breach of contract for failing to complete repairs as required by the lease and state law, and common-law negligence in failing to take steps to prevent injury from the leak.The landlord removed the case to the United States District Court for the Eastern District of Virginia, which treated the landlord’s demurrer as a motion to dismiss. The district court dismissed the negligence claim, finding the complaint did not allege that the landlord or contractor undertook repairs or performed any negligent acts—only that they inspected and confirmed the leak. The court concluded Virginia law does not impose a tort duty on landlords for failing to repair, but only for negligent acts in the course of repair. The breach of contract claim survived the motion to dismiss, but the parties later stipulated to voluntarily dismiss it to allow an immediate appeal.The United States Court of Appeals for the Fourth Circuit first determined it had appellate jurisdiction, accepting the tenant's binding representation that she was abandoning the contract claim with prejudice. The court then affirmed the district court’s dismissal of the negligence claim. It held that, under Virginia law, a landlord is not liable in tort for failing to make repairs unless the landlord undertakes repairs and does so negligently. Because the complaint did not allege any negligent repair or positive act, only nonfeasance, the negligence claim failed as a matter of law. View "Metz v. McCarthy" on Justia Law

A company operating a private detention facility in Colorado under contract with U.S. Immigration and Customs Enforcement was sued in a class action by a former detainee. The lawsuit challenged two of the company’s work policies for detainees: a sanitation policy that required unpaid cleaning under threat of punishment, and a voluntary work program offering minimal pay. Plaintiffs alleged that the sanitation policy violated federal anti-forced-labor laws and that the voluntary work program constituted unjust enrichment under Colorado law.After discovery, the United States District Court for the District of Colorado considered the company’s argument that, under the Supreme Court’s decision in Yearsley v. W. A. Ross Construction Co., it could not be held liable for conduct that the government had lawfully “authorized and directed.” The District Court concluded that the government contract did not instruct the company to adopt the specific work policies at issue and that the company had developed those policies on its own. Therefore, the court held that the Yearsley doctrine did not shield the company from liability and allowed the case to proceed to trial.The company appealed immediately, but the United States Court of Appeals for the Tenth Circuit dismissed the appeal for lack of jurisdiction, holding that a denial of Yearsley protection is not subject to interlocutory appeal under Cohen v. Beneficial Industrial Loan Corp.The Supreme Court of the United States affirmed the Tenth Circuit’s decision, holding that Yearsley provides a merits defense, not an immunity from suit. Therefore, a pretrial order denying Yearsley protection cannot be immediately appealed; any review must wait until after final judgment. The Court remanded the case for further proceedings. View "Geo Group, Inc. v. Menocal" 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