Justia Contracts Opinion Summaries

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

A software company that provides donor management and data hosting services for nonprofit and educational entities experienced a significant ransomware attack. Hackers accessed and exfiltrated sensitive client data over several months, leading to widespread concern among the company’s clients about the adequacy of the company’s response. Rather than conducting a thorough investigation and remediation itself, the company provided clients with a toolkit for self-investigation and remediation. Dissatisfied, the clients undertook their own investigations and incurred expenses for legal counsel, notifications, credit monitoring, and other remedial measures. Insurance carriers that had issued policies covering such cyber incidents paid out claims for these losses, then sought to recover from the software company as subrogees and assignees of their insured clients.The Superior Court of the State of Delaware initially dismissed the insurers’ complaints for failing to state a claim and, after amended complaints were filed, dismissed them with prejudice. The Superior Court reasoned that the insurers failed to provide sufficient factual support for each insured’s claim by pleading in the aggregate, and further found that proximate cause had not been adequately alleged, as the complaints did not link the damages to any specific contractual obligation.On appeal, the Supreme Court of the State of Delaware reviewed the Superior Court’s decision de novo. The Supreme Court held that the insurers, as subrogees/assignees, adequately pled a breach of contract claim under New York law, which governed the agreements, and that Delaware’s notice pleading standard was satisfied. The Court found that the amended complaints sufficiently alleged the existence of contracts, performance by the insureds, breach by the company, and resulting damages, and that proximate cause was properly pled. The Supreme Court reversed the Superior Court’s dismissal and remanded for further proceedings. View "Travelers Casualty and Surety Company of America v. Blackbaud, Inc." on Justia Law

A global manufacturer of automotive clutches entered into a contract with a components manufacturer to supply levers for use in the clutches. The levers were to be manufactured strictly according to the specifications provided, with no design responsibility on the supplier. Between 2017 and 2018, several of the supplied levers broke, causing clutch failures in the field. The buyer communicated with the supplier about these issues through emails, reports, and meetings, and the parties disputed whether these communications constituted notice of breach. The buyer eventually filed suit for breach of contract and breach of express and implied warranties.The United States District Court for the Northern District of Ohio denied the supplier’s motions for judgment on the pleadings and summary judgment, holding that there were sufficient allegations and factual disputes regarding whether the buyer had given adequate notice of breach as required under Ohio law. The case proceeded to trial, where the jury found in favor of the buyer on all claims and awarded significant damages. The supplier appealed, arguing that the Ohio statute requiring pre-suit notice of breach barred the buyer’s claims, and that errors in witness testimony and jury instructions warranted a new trial.The United States Court of Appeals for the Sixth Circuit affirmed the district court’s rulings. The appellate court held that under Ohio Revised Code § 1302.65(C)(1), interpreted through Ohio Supreme Court precedent, notice of breach does not require explicit language alleging breach, but rather communication sufficient to alert the seller that there is a problem. The court found the evidence supported the jury’s verdict, the jury instructions properly reflected Ohio law, and there was no reversible error in the admission of witness testimony. The judgment in favor of the buyer was affirmed. View "Eaton Corp. v. Angstrom Auto. Group, LLC" 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

A dispute arose following the acquisition of an online video game company, where the buyer agreed to pay a base purchase price with the possibility of an additional earnout payment if certain financial targets were met. The merger agreement included a provision requiring disputes over the calculation of this earnout to be resolved by a mutually agreed-upon accounting firm acting as an arbitrator. After closing, the seller representative alleged that the buyer acted in bad faith to reduce the earnout, failed to provide required information and access, and breached both express and implied contractual obligations. The buyer responded by invoking the alternative dispute resolution (ADR) clause and moved to compel arbitration.The Court of Chancery of the State of Delaware granted the buyer’s motion, finding that the seller’s claims—including those alleging bad-faith conduct and denial of information access—were fundamentally disputes over the earnout calculation and thus fell within the scope of the ADR provision. The court held that questions about information access and related procedural matters were for the arbitrator to decide. The seller’s complaint was dismissed with prejudice, and the dispute proceeded to arbitration, where the arbitrator ruled in favor of the buyer. The Court of Chancery later confirmed the arbitrator’s award, rejecting the seller’s arguments regarding undisclosed conflicts of interest.The Supreme Court of the State of Delaware reviewed the case. It affirmed the Court of Chancery’s judgment, holding that the bad-faith breach claims and the information-access claim were properly subject to arbitration under the agreement. The court found no error in the lower court’s refusal to vacate the arbitration award, concluding that the seller failed to demonstrate an undisclosed relationship that would indicate evident partiality. The Court of Chancery’s decisions to compel arbitration and to confirm the award were affirmed. View "Fortis Advisors LLC vs. Stillfront Midco AB" on Justia Law

A franchisee brought several claims against a franchisor and related parties, including allegations of breach of contract, unjust enrichment, violations of Florida law, and Fair Labor Standards Act (“FLSA”) violations. The parties settled, with the franchisee receiving $50,000 and both sides signing a mutual release that broadly barred any future claims. The agreement was not approved by a court or the Department of Labor and contained a confidentiality provision. Subsequently, the franchisee initiated a separate action for fraudulent transfer and other non-FLSA claims, arguing these were not barred by the settlement’s release.After the settlement, the franchisee filed a supplemental complaint in the United States District Court for the Middle District of Florida, alleging fraudulent transfer and related non-FLSA claims. The franchisor responded with a motion for judgment on the pleadings, citing the settlement’s release. The franchisor also filed counterclaims, including breach of contract based on the franchisee’s new filings. The franchisee attempted to amend his complaint to add a claim for rescission, arguing fraudulent inducement, but the magistrate judge denied this motion, finding it was inadequately pleaded and untimely. The franchisee did not properly object to this denial before the district judge.The United States Court of Appeals for the Eleventh Circuit considered whether the unapproved settlement agreement barred the non-FLSA claims. The court held that, while FLSA claims cannot be waived or settled without court or Department of Labor approval, non-FLSA claims may be released according to state contract law. The court found the release enforceable under Florida law as to non-FLSA claims and affirmed the district court’s dismissal of the fraudulent transfer claims and grant of summary judgment to the franchisor on its counterclaims. The court also ruled the franchisee had waived his right to appeal the denial of his motion to amend. View "O'Neal v. American Shaman Franchise Systems, Inc." on Justia Law

The case centers on a competitive bidding process conducted by the Maine Department of Health and Human Services (DHHS) for a contract to provide medical nonemergency transportation (NET) brokerage services in one of the state’s transit regions. Waldo Community Action Partners (Waldo CAP), the incumbent provider in Region 5 since 2014, submitted a proposal in response to the Request for Proposals (RFP). The RFP required bidders to detail their qualifications and provide three examples of relevant projects. Waldo CAP only completed details for one project, leaving the remaining two project sections blank except for the notation “NA.” After scoring, Waldo CAP did not receive the highest overall score; ModivCare Solutions, LLC, a vendor with extensive experience in other regions, was awarded the contract.Waldo CAP appealed the contract award to the Department of Administrative and Financial Services (DAFS) appeal committee, arguing that the process violated procurement laws and that the decision was arbitrary and capricious. The appeal committee affirmed DHHS’s decision, finding the point deduction for incomplete information justified and not arbitrary. Waldo CAP then sought judicial review in the Maine Superior Court, which also affirmed the committee’s decision.The Supreme Judicial Court of Maine reviewed the case, applying a deferential standard to the agency’s factual findings and statutory interpretations. The Court held that the “best-value bidder” under Maine law is determined strictly by the criteria and requirements set forth in the RFP, and that the agency acted within its discretion in scoring and did not act arbitrarily or capriciously. The Court affirmed the lower court’s judgment, upholding the award to ModivCare and lifting the stay on the contract award. View "Waldo Community Action Partners v. Department of Administrative and Financial Services" on Justia Law

Fieldwood Energy operated an offshore platform near Louisiana and contracted with United Fire and Safety to provide fire watch services for repairs. Fieldwood also separately chartered a liftboat from Aries Marine to support the work, which included housing and crane services for the contractors. During the project, the liftboat listed and capsized, leading to personal injuries for a United Fire employee. Aries Marine, facing liability claims, sought indemnification from United Fire based on a cross-indemnification clause in the 2013 Master Services Contract (MSC) between Fieldwood and United Fire.The United States District Court for the Eastern District of Louisiana considered cross-motions for summary judgment on whether the MSC was a maritime contract. The district court found that the contract was not maritime in nature, applying Louisiana law via the Outer Continental Shelf Lands Act (OCSLA), which incorporates the law of the adjacent state unless federal maritime law applies. Louisiana’s Oilfield Anti-Indemnity Act invalidated the indemnity provisions. Aries’s motions for reconsideration were denied, leading to this appeal.The United States Court of Appeals for the Fifth Circuit reviewed the district court’s grant of summary judgment de novo. The appellate court agreed that the MSC did not require or contemplate that a vessel would play a substantial role in the contracted fire watch services. It found that only Fieldwood, not United Fire, expected the liftboat’s substantial involvement, and that such a shared expectation was necessary under circuit precedent to create a maritime contract. Because the parties did not share this expectation, the contract was not maritime, and Louisiana law voided the indemnity provisions. The Fifth Circuit affirmed the district court’s judgment. View "Aries Marine v. United Fire & Safety" on Justia Law

Morgan Lohman purchased a 25.8-acre property, knowing that a homeowners’ association, Cave Bay Community Services, Inc., held a permanent easement on 7.31 acres and had an option agreement with the sellers, the Drehers, to purchase the easement land for one dollar once the Drehers’ loans were paid off. Despite concerns about the effect of this option on the value and use of his property, Lohman proceeded with the purchase. After the sale, the Drehers paid off their loans, and Cave Bay exercised its option to buy the easement property for one dollar, which Lohman refused to honor.Cave Bay filed suit against Lohman in the District Court of the First Judicial District of Idaho, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and seeking specific performance of the option agreement. Cave Bay moved for summary judgment only as to the specific performance “claim.” The district court granted summary judgment to Cave Bay on that basis, struck much of Lohman’s opposing declaration, and awarded Cave Bay attorney fees and costs. The court did not address the merits of the underlying breach of contract claim. After the parties dismissed the remaining claims, Lohman appealed.The Supreme Court of the State of Idaho reviewed the case and held that specific performance is a remedy, not a stand-alone cause of action. The court concluded that the district court erred by granting summary judgment on specific performance without first determining liability on the underlying breach of contract claim. The Supreme Court vacated the district court’s amended judgment, reversed the summary judgment ruling, and remanded the case for further proceedings. The court also vacated the award of attorney fees and costs, but awarded appellate costs to Lohman. No attorney fees were awarded on appeal as there was no prevailing party at this stage. View "Cave Bay Community Services v. Lohman" 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