Justia Contracts Opinion Summaries

Baxter Senior Living, LLC, an assisted living facility in Anchorage, Alaska, obtained an insurance policy from Zurich American Insurance Company covering various types of losses, including those caused by microorganisms. In response to the COVID-19 pandemic, Baxter implemented several operational restrictions and incurred additional costs. Despite these measures, the facility experienced COVID-19 cases among staff and residents. Baxter filed a claim with Zurich for loss of business income due to the pandemic, which Zurich denied.Baxter then filed a complaint in February 2022, alleging breach of contract and other claims, arguing that the presence of COVID-19 and related governmental orders caused a loss of use of its property, constituting "direct physical loss of or damage to" the property under the insurance policy. Zurich moved to dismiss the case, arguing that neither the presence of the virus nor the governmental orders constituted "direct physical loss of or damage to" property. The U.S. District Court for the District of Alaska certified two questions to the Alaska Supreme Court regarding the interpretation of this phrase in the context of the pandemic.The Alaska Supreme Court reviewed the certified questions and concluded that neither the presence of the COVID-19 virus at an insured property nor the operational restrictions imposed by pandemic-related governmental orders constitute "direct physical loss of or damage to" the property under a commercial insurance policy. The court emphasized that "direct physical loss" requires some physical alteration or deprivation of possession of the property, and "direct physical damage" requires a tangible alteration of the property. The court noted that the presence of the virus does not physically alter the property but merely attaches to it, and the operational restrictions do not cause a physical alteration or deprivation of possession. Therefore, the court answered both certified questions in the negative. View "Baxter Senior Living, LLC v. Zurich American Insurance Company" on Justia Law

In June 2016, an explosion damaged a gas processing plant in Moss Point, owned by Enterprise Gas Processing LLC. Enterprise alleged that the explosion was caused by Hetsco Inc.'s negligent repair of a heat exchanger. Hetsco argued that a Proposal for Services between it and the plant's prior owner, BP, entitled it to summary judgment. The circuit court agreed, granting summary judgment in favor of Hetsco.The Jackson County Circuit Court found that BP's employee, Hayes, had apparent authority to bind BP to the Proposal for Services, which included a forum-selection clause and a two-year statute of limitations. The court concluded that the Proposal for Services was a valid and enforceable contract, and thus, Enterprise's claims were barred by the forum-selection clause and the statute of limitations.The Supreme Court of Mississippi reviewed the case and found that genuine issues of material fact remained regarding Hayes's apparent authority to bind BP to the Proposal for Services. The court noted that the evidence did not conclusively show that Hayes had the authority to agree to the legal terms of the Proposal for Services. Additionally, the court found that there were factual disputes about whether BP ratified the Proposal for Services and whether Enterprise could be bound by it as BP's successor.The Supreme Court of Mississippi reversed the circuit court's grant of summary judgment and remanded the case for further proceedings. The court held that the contractually shortened two-year statute of limitations in the Proposal for Services was unenforceable under Mississippi law. The court did not address the enforceability of the forum-selection clause, leaving that issue for the circuit court to consider on remand. View "ACE American Insurance Company v. Hetsco, Inc." on Justia Law

Michael Hermalyn, a former employee of DraftKings, left his position to join a rival company, Fanatics, based in California. DraftKings, headquartered in Massachusetts, claimed that Hermalyn's new role violated a noncompete agreement he had signed, which included a Massachusetts choice-of-law provision and a one-year noncompete clause. DraftKings sued Hermalyn in the U.S. District Court for the District of Massachusetts for breach of the noncompete agreement.The district court sided with DraftKings, applying Massachusetts law to determine the enforceability of the noncompete agreement. The court found the noncompete enforceable and issued a preliminary injunction preventing Hermalyn from competing against DraftKings in the United States for one year. Hermalyn appealed, arguing that California law, which generally bans noncompetes, should apply instead of Massachusetts law. Alternatively, he argued that if Massachusetts law applied, the injunction should exclude California.The United States Court of Appeals for the First Circuit reviewed the case. The court examined whether the district judge abused her discretion in granting the preliminary injunction and whether she made any legal errors in applying Massachusetts law. The appellate court found that Massachusetts law was correctly applied, noting that Massachusetts generally respects choice-of-law provisions unless they violate a fundamental policy of another state with a materially greater interest. The court concluded that Hermalyn failed to demonstrate that California's interest in banning noncompetes was materially greater than Massachusetts's interest in enforcing them.The First Circuit also upheld the scope of the preliminary injunction, rejecting Hermalyn's argument to exclude California. The court reasoned that excluding California would undermine the effectiveness of the injunction, as Hermalyn's role involved interacting with clients in states where online sports betting is legal. Consequently, the appellate court affirmed the district court's decision and awarded costs to DraftKings. View "DraftKings Inc. v. Hermalyn" on Justia Law

Douglass Sloan provided a $60,000 short-term loan to Carlos Allen for property rehabilitation, with a 60-day term and a 20% fixed return rate. If unpaid within 60 days, the loan accrued an additional 2% every subsequent 60 days. The loan was subject to the maximum interest rate allowed by D.C. law if not repaid within 60 days. Sloan sought to collect the debt, leading to a dispute over whether the loan's interest rate was usurious, as D.C. law caps interest rates at 24% per annum.The Superior Court of the District of Columbia initially ruled that Allen had waived his usury defense by not raising it for nearly seven years. The court awarded Sloan $256,946.46 plus $97,450 in attorney’s fees and costs. On appeal, the District of Columbia Court of Appeals upheld the attorney’s fees but remanded the case for reconsideration of the usury defense waiver. The trial court then found no substantial prejudice to Sloan from Allen’s delay and ruled the loan usurious, reducing the award to $39,026.46, the remaining principal, plus the affirmed attorney’s fees.The District of Columbia Court of Appeals reviewed the case again. It upheld the trial court’s findings that Allen had not waived his usury defense and that the loan was usurious, as it effectively charged a 34.7% interest rate in its first year. The court rejected Sloan’s arguments against these findings but agreed that Sloan was entitled to post-judgment interest on the award from the date of the initial October 2020 judgment. The court also dismissed Allen’s cross-appeal, which challenged the validity of the loan and the attorney’s fees, as these issues had been resolved in a prior decision. The case was remanded for the imposition of post-judgment interest on the $39,026.46 award. View "Sloan v. Allen" on Justia Law

Ken Johansen filed a lawsuit against Liberty Mutual, alleging violations of the Telephone Consumer Protection Act (TCPA). Liberty Mutual had contracted with Digitas, Inc. for marketing services, which included ensuring compliance with legal requirements. Johansen's complaint stemmed from telemarketing calls he received, which were traced back to Spanish Quotes, a subcontractor of Digitas. Liberty Mutual sought indemnification from Digitas under their Master Services Agreement (MSA), which included a warranty and indemnification clause.The United States District Court for the District of Massachusetts reviewed the case and found that Digitas had breached its contractual duty to indemnify Liberty Mutual. The court partially granted Liberty Mutual's motion for summary judgment, determining that Digitas had violated its warranty by allowing telemarketing practices that led to Johansen's complaint. The court also found that Liberty Mutual had met the preconditions for triggering Digitas's indemnity obligation. However, the court did not determine the damages and closed the case, leading Digitas to appeal.The United States Court of Appeals for the First Circuit reviewed the appeal. The court affirmed the district court's decision, agreeing that Digitas breached its warranty and that Liberty Mutual satisfied the preconditions for indemnification. The appellate court concluded that the MSA did not require a finding of actual liability for the indemnity obligation to be triggered. The court also found that Liberty Mutual had provided Digitas with the opportunity to control the defense, which Digitas did not properly assume. The case was remanded for further proceedings to address any remaining issues, including the determination of damages. View "Liberty Mutual Insurance v. Digitas, Inc." on Justia Law

Two plaintiffs, Smith-Phifer and Patterson, served with the Charlotte Fire Department for over twenty years and alleged racial discrimination by the department. They filed a lawsuit against the City of Charlotte, claiming violations of Title VII, 42 U.S.C. §§ 1981 & 1983, and the North Carolina Constitution. The case was initially brought in state court but was removed to federal court. Smith-Phifer and the City reached a settlement during her trial, while Patterson's case was delayed due to illness and later went to mediation.The United States District Court for the Western District of North Carolina granted Smith-Phifer and Patterson’s motions to enforce their settlement agreements. The court found that the City breached the agreements by not treating the settlement payments as pension-eligible wages under the Charlotte Firefighters Retirement Systems Act. The City appealed, arguing that the district court erred in its decision, particularly in not holding an evidentiary hearing for Patterson’s case and in its interpretation of the settlement terms regarding pension eligibility.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court vacated the district court’s order regarding Patterson, stating that an evidentiary hearing was necessary to determine whether a complete settlement agreement was reached. The court found that there were unresolved factual disputes about the terms of the agreement, particularly regarding sick leave and pension eligibility.However, the court affirmed the district court’s decision regarding Smith-Phifer. It held that the City breached the settlement agreement by failing to make the required retirement deduction from the payment to Smith-Phifer. The court concluded that the payment was “Compensation” under the Charlotte Firefighters Retirement Systems Act, which mandated the deduction. The case was remanded for further proceedings consistent with these findings. View "Smith-Phifer v. City of Charlotte" on Justia Law

A student at Rosalind Franklin University was accused of sexual assault by another student after a night of heavy drinking and marijuana use. The accused student, Nicholas Gash, had no memory of the events due to his intoxication. The university conducted an investigation, during which Gash received notices of allegations and participated in interviews. Despite attempting to withdraw from the university, Gash was informed that his withdrawal was not approved, and the Title IX hearing proceeded. The hearing panel found Gash responsible for the alleged assault and sanctioned him with expulsion.The United States District Court for the Northern District of Illinois dismissed Gash’s claims of sex-based discrimination under Title IX and breach of contract under Illinois law. The court found that the procedural errors cited by Gash did not suggest sex-based discrimination. Gash’s state law contract claims were also dismissed, as the court determined that he did not meet the high burden of showing that the university acted arbitrarily or in bad faith.The United States Court of Appeals for the Seventh Circuit reviewed the case de novo. The court affirmed the district court’s dismissal, holding that the procedural errors and alleged biases did not plausibly suggest sex-based discrimination. The court noted that the errors could indicate a pro-victim or pro-complainant bias but not an anti-male bias. Additionally, the court found that Gash did not provide sufficient evidence to support his breach of contract claim, as he failed to show that the university acted without a rational basis or in bad faith. The court concluded that the university’s actions, while flawed, did not constitute sex-based discrimination or breach of contract. View "Gash v. Rosalind Franklin University" on Justia Law

In this case, the plaintiff purchased a new 2014 Kia Optima and soon experienced issues with the vehicle's transmission. Despite multiple visits to the dealership, the problem persisted. The plaintiff requested a buyback from Kia Motors America, Inc. (Kia), but Kia initially declined, citing an inability to replicate the issue. Eventually, Kia offered to repurchase the vehicle, but the plaintiff found the terms unacceptable and continued to use the car while pursuing legal action.The Los Angeles County Superior Court found in favor of the plaintiff, awarding restitution and a civil penalty for Kia's willful violation of the Song-Beverly Consumer Warranty Act. The jury awarded $42,568.90 in restitution and $85,317.80 in civil penalties, totaling $127,976.70. Kia filed post-trial motions to reduce the restitution amount and to strike the civil penalty, arguing that certain costs should not be included and that there was insufficient evidence of willfulness. The trial court partially granted Kia's motions, striking the civil penalty but upholding the restitution amount.The California Court of Appeal, Second Appellate District, reviewed the case. The court held that the restitution award should exclude the cost of the manufacturer’s rebate, the optional theft deterrent device, the optional service contract, and certain insurance premiums. The court found that these costs were not recoverable under the Act. However, the court found substantial evidence to support the jury's finding that Kia knowingly violated the Act or did not act with a good faith and reasonable belief that it was complying. The court affirmed the trial court's order for a new trial on the issue of the civil penalty, directing that the new trial be consistent with its opinion and limited to the 21-month period between Kia's violation and the plaintiff's lawsuit. View "Valdovinos v. Kia Motors America, Inc." on Justia Law

The case involves a dispute over the control of Byju’s Alpha, Inc., a Delaware subsidiary of Think and Learn Private Ltd. (T&L), an Indian company. Byju’s Alpha entered into a $1.2 billion loan agreement with GLAS Trust Company LLC (GLAS) as the administrative and collateral agent. The agreement required Whitehat, another T&L subsidiary, to become a guarantor, contingent on approval from the Reserve Bank of India (RBI). However, changes in RBI regulations made it impossible for Whitehat to obtain the necessary approval.The Court of Chancery of Delaware held a trial and ruled that Timothy R. Pohl was the sole director and officer of Byju’s Alpha, following actions taken by GLAS to enforce its rights under the loan agreement. The court found that the failure of Whitehat to accede as a guarantor constituted a breach of the loan agreement, allowing GLAS to take control of Byju’s Alpha’s shares and appoint Pohl as the sole director and officer.The Delaware Supreme Court reviewed the case and affirmed the Court of Chancery’s decision. The Supreme Court held that the amendments to the loan agreement explicitly defined Whitehat’s failure to accede as a “Specified Default,” entitling GLAS to enforce its remedies. The court also rejected the impossibility defense, concluding that the changes in RBI regulations were foreseeable and could have been guarded against in the contract. The court found that the sophisticated parties involved should have anticipated the regulatory changes and included provisions to address such risks.In conclusion, the Delaware Supreme Court affirmed the lower court’s ruling that Pohl was the sole director and officer of Byju’s Alpha, and that GLAS was entitled to enforce its remedies under the loan agreement due to the breach caused by Whitehat’s failure to accede as a guarantor. View "Ravindran v. GLAS Trust Company LLC" on Justia Law

Holsum de Puerto Rico, Inc. ("Holsum") contracted with Peerless Food Equipment ("Peerless") to manufacture a machine for sandwiching cookies and with Compass Industrial Group, LLC ("Compass") for a tray-loader machine. The machines malfunctioned, leading Holsum to sue both companies for breach of contract and negligence. The jury found in favor of Holsum against Compass but ruled in favor of Peerless. Peerless then sought attorney fees from Holsum, citing a fee-shifting provision in their contract and a Puerto Rico court rule.The United States District Court for the District of Puerto Rico denied Peerless's motion for attorney fees. The court found that the fee-shifting provision was not clearly incorporated into the contract through a hyperlink and that Holsum did not act obstinately or frivolously in bringing its claims against Peerless. Peerless appealed this decision.The United States Court of Appeals for the First Circuit affirmed the district court's decision. The appellate court agreed that the contract did not clearly communicate the incorporation of the fee-shifting provision via the hyperlink. Additionally, the court found no abuse of discretion in the district court's determination that Holsum's claims were not frivolous and that Holsum did not act obstinately in refusing to settle before trial. The appellate court emphasized that exercising the right to a jury trial in good faith does not constitute obstinacy. View "Holsum de Puerto Rico, Inc. v. ITW Food Equipment Group LLC" on Justia Law