Justia Contracts Opinion Summaries

Jason and Kacie Highsmith hired Shelter, LLC to manage a home renovation project and later contracted with Design Gaps, Inc. to design and install cabinets and closets. The contracts required arbitration for disputes but did not specify completion dates. Design Gaps failed to meet multiple promised deadlines, leading the Highsmiths to terminate the contracts and hire another company. The Highsmiths shared Design Gaps' copyrighted drawings with the new contractor. They then filed for arbitration, alleging breach of contract and other claims, while Design Gaps counterclaimed for various issues, including copyright infringement.The arbitrator held a three-day hearing, during which the Highsmiths presented multiple witnesses, while Design Gaps only presented David Glover. The arbitrator found in favor of the Highsmiths, awarding them damages and attorney’s fees, and denied Design Gaps' counterclaims, including the copyright claim, citing fair use and lack of evidence for copyright registration.Design Gaps petitioned the United States District Court for the District of South Carolina to vacate the arbitration award, arguing the arbitrator disregarded the law and failed to issue a reasoned award. The district court denied the petition and confirmed the arbitration award, also granting the Highsmiths' motion for attorney’s fees.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court dismissed the appeal, citing lack of federal jurisdiction based on the precedent set in Friedler v. Stifel, Nicolaus, & Co., which held that federal courts do not have jurisdiction over motions to vacate arbitration awards unless there is an independent basis for federal jurisdiction beyond the Federal Arbitration Act. The court concluded that the petition did not meet this requirement. View "Design Gaps, Inc. v. Shelter, LLC" on Justia Law

The case involves a business venture between W.R. Cobb Company (Cobb) and V.J. Designs LLC (VJ Designs) to sell diamond products under the Forevermark brand. Cobb, unable to secure a license directly from Forevermark, entered into an agreement with VJ Designs, an existing Forevermark licensee, to form a new company, WR Cobb/VJ LLC (the Joint Entity). The agreement stipulated that the Joint Entity would operate under the Forevermark license. However, VJ Designs could not transfer its Forevermark rights without Forevermark's written consent. The venture quickly fell apart, and Cobb sued VJ Designs and its owner, Benjamin Galili, to recover funds paid under the agreement, alleging breach of contract and misrepresentation.The United States District Court for the District of Rhode Island held a two-day bench trial and ruled in favor of VJ Designs and Galili on all claims. The court found that VJ Designs did not breach the contract or misrepresent any material facts. Cobb appealed, arguing that the district court erred by not rescinding the agreement and not holding Galili personally liable for fraud and misrepresentation.The United States Court of Appeals for the First Circuit reviewed the case. The court affirmed the district court's judgment, holding that VJ Designs did not breach the contract by failing to assign the Forevermark license to the Joint Entity upon execution of the agreement. The court found no provision in the agreement requiring immediate transfer of the license and noted that the parties understood Forevermark's consent was necessary. The court also rejected Cobb's claims of fraud and misrepresentation, finding no evidence of material misrepresentation by VJ Designs or Galili. Additionally, the court dismissed Cobb's mutual mistake theory as it was not pled in the complaint and was raised too late in the proceedings. View "W.R. Cobb Company v. VJ Designs, LLC" on Justia Law

FlightSafety International Inc. (FlightSafety) supplied the U.S. Air Force with commercial technical data under subcontracts awarded by CymSTAR, LLC. The data included restrictive markings, which the Air Force challenged. The Armed Services Board of Contract Appeals (Board) determined that the restrictive markings were improper under applicable statutes and regulations, leading FlightSafety to appeal.The Board found that the restrictive markings placed by FlightSafety on the technical data were improper. The Board concluded that the government had unrestricted rights to the data, as it was necessary for operation, maintenance, installation, or training (OMIT data). The Board also determined that the government could challenge the restrictive markings under the Validation Clause, which was not limited to challenges based on the funding source of the data.The United States Court of Appeals for the Federal Circuit reviewed the case and affirmed the Board's decision. The court held that the government had unrestricted rights to the OMIT data and that the restrictive markings placed by FlightSafety contradicted these rights. The court also held that the government could challenge the restrictive markings under the Validation Clause, which was not limited to challenges based on the funding source of the data. The court found that the restrictive markings, including the terms "proprietary" and "confidential," as well as the requirement for written authorization, were impermissible as they contradicted the government's unrestricted rights. The court also found that the copyright notice in the markings was misleading and contradicted the government's rights. View "FLIGHTSAFETY INTERNATIONAL INC. v. AIR FORCE " on Justia Law

Barton Hankins was hired by Crain Automotive Holdings, LLC in 2019 as Chief Operating Officer and was offered a deferred compensation plan (DCP). After four years, Hankins resigned and sought compensation under the DCP, which Crain denied. Hankins then filed a lawsuit under the Employee Income Retirement Security Act of 1974 (ERISA) to claim his benefits. The DCP stipulated that Hankins could earn a percentage of Crain’s fair market value upon his exit, with full vesting at five years. Having served four years, Hankins was entitled to 80% of the benefits.The United States District Court for the Eastern District of Arkansas granted judgment in favor of Hankins, concluding that the DCP did not require the creation of an Employment Agreement or a Confidentiality, Noncompete, and Nonsolicitation Agreement for enforceability. The court found that Crain’s claims of misconduct by Hankins were unsubstantiated and awarded Hankins attorney’s fees, determining that Crain’s conduct was sufficiently culpable.The United States Court of Appeals for the Eighth Circuit reviewed the case. The court affirmed the district court’s judgment, holding that Crain’s interpretation of the DCP was unreasonable. The court found that the DCP’s Article 4, which mentioned the Employment and Confidentiality Agreements, did not create a condition precedent but rather a condition subsequent. The court also upheld the award of attorney’s fees, noting that Crain’s actions lacked merit and were raised only after Hankins sought his vested compensation. The appellate court concluded that the district court did not abuse its discretion in its rulings. View "Hankins v. Crain Automotive Holdings, LLC" on Justia Law

Brothers Robert, Gary, and Richard Hunter, experienced farmers, converted their general partnership into a limited liability company (LLC) named Hunter Three Farms, LLC. Each brother owned twenty voting units, while Hunter of Iowa, Inc. owned forty nonvoting units. The LLC did not have an operating agreement but filed a statement of authority with the Iowa Secretary of State, which allowed a majority of voting members to make ordinary business decisions.In 2018, Richard submitted a claim to the Syngenta Corn Seed Settlement Program on behalf of "Hunter Farms" using the LLC's tax identification number, without informing his brothers. He received a $62,467.91 settlement payment, which he deposited into an account inaccessible to the LLC or his brothers. When Robert and Gary discovered the payment, they demanded Richard distribute the funds, but he refused, claiming entitlement to the entire amount. Robert and Gary then authorized the LLC to sue Richard to recover the settlement proceeds.The Iowa District Court for Greene County granted Richard's motion for summary judgment, ruling that the LLC lacked standing to sue without unanimous consent from all voting members, including Richard. The Iowa Court of Appeals reversed this decision, with a divided panel concluding that the LLC could sue Richard if all disinterested members authorized the litigation. The dissenting judge argued that unanimous consent was required.The Iowa Supreme Court reviewed the case and clarified that the issue was one of authority, not standing. The court held that a majority of the voting members could authorize the LLC to file a suit to recover funds owed to the company, as such actions are within the ordinary course of the LLC's activities. Consequently, the court vacated the decision of the Court of Appeals, reversed the district court's judgment, and remanded the case for further proceedings. View "Hunter Three Farms, LLC v. Hunter" on Justia Law

Mary Langbehn sued her son, Michael Langbehn, and his company, Langbehn Land and Cattle Co. (LL&C), alleging Michael breached his fiduciary duty as a co-trustee of his deceased father’s trust. Michael filed counterclaims for unjust enrichment and quantum meruit related to improvements he claimed to have made to real estate he leased from his father’s trust and Mary’s separate living trust. The circuit court granted summary judgment in favor of Mary on her claims and on Michael’s counterclaims. The court also removed Michael as a co-trustee and awarded Mary $513,796.94 in damages. Michael appealed.The Circuit Court of the Third Judicial Circuit in Beadle County, South Dakota, found that Michael had engaged in self-dealing and breached his fiduciary duty of loyalty to the credit trust by profiting from subleases. The court concluded that Michael failed to keep Mary reasonably informed and acted in bad faith. The court granted summary judgment on Mary’s claims and Michael’s counterclaims, and removed Michael as a co-trustee.The Supreme Court of the State of South Dakota reviewed the case. The court held that Michael did not engage in impermissible self-dealing because the trust instrument expressly allowed him to lease the land at below-market rates. However, the court found that genuine issues of material fact remained regarding whether Michael disclosed the subleases and additional income to Mary. The court reversed the summary judgment on Mary’s breach of fiduciary duty claims and the decision to remove Michael as a co-trustee, remanding for further proceedings. The court affirmed the summary judgment on Michael’s counterclaims for unjust enrichment and quantum meruit, as there was no evidence that Mary requested or agreed to pay for the improvements. View "Langbehn V. Langbehn" on Justia Law

The petitioner, Lin Luo, sought review of a final order from the Office of Administrative Hearings (OAH) that determined her ineligible for unemployment benefits from April 5, 2023, to June 28, 2023. Luo was terminated from her position at the American Chemical Society (ACS) and received post-termination payments under an Agreement and General Release. The OAH administrative law judge (ALJ) classified these payments as severance pay, which disqualified her from receiving unemployment benefits. Luo argued that the payments were settlement payments for sexual harassment claims, not severance pay.The Department of Employment Services (DOES) initially found Luo ineligible for benefits for a slightly different period. Luo appealed to OAH, where the ALJ held a hearing and excluded Luo's evidence of her harassment claims, citing the parol evidence rule. The ALJ concluded that the Agreement's language unambiguously indicated the payments were severance pay, based on Luo's years of service and lack of advance notice of termination. The ALJ also noted that the Agreement included a release of claims against ACS and found that Luo signed the Agreement without fraud, duress, or mutual mistake.The District of Columbia Court of Appeals reviewed the case and found that the ALJ erred in not considering parol evidence regarding the nature of the payments. The court noted that the parol evidence rule does not preclude evidence showing that factual recitals in an agreement are untrue. The court concluded that the ALJ should have considered Luo's testimony and evidence about her harassment claims to determine the parties' intent regarding the payments. The court vacated the OAH orders and remanded the case for further proceedings to consider this evidence. View "Luo v. District of Columbia Department of Employment Services" on Justia Law

A hospital in Siskiyou County, California, filed a lawsuit against the County of Siskiyou and other defendants, challenging the practice of bringing individuals with psychiatric emergencies to its emergency department under the Lanterman-Petris-Short (LPS) Act. The hospital argued that it was not equipped or licensed to provide the necessary psychiatric care and sought to prevent the county from bringing such patients to its facility unless they had a physical emergency condition. The hospital also sought reimbursement for the costs associated with holding these patients.The Siskiyou County Superior Court denied the hospital's motion for a preliminary injunction, which sought to stop the county from bringing psychiatric patients to its emergency department. The court found that the hospital had not demonstrated a likelihood of success on the merits and that the burden on the county and the potential harm to the patients outweighed the hospital's concerns.The hospital's complaint included several causes of action, including violations of Medicaid laws, disability discrimination laws, mental health parity laws, and section 17000 of the Welfare and Institutions Code. The hospital also alleged breach of an implied-in-fact contract for the costs incurred in providing post-stabilization services to psychiatric patients. The trial court sustained demurrers to the complaint without leave to amend, finding that the hospital failed to identify any clear legal mandate that the county or the Department of Health Care Services had violated.The California Court of Appeal, Third Appellate District, affirmed the trial court's judgment of dismissal. The appellate court concluded that the hospital had not identified any mandatory and ministerial duty that the county or the department had violated, which is necessary to obtain a writ of mandate. The court also found that the hospital's breach of contract claim failed because there were no allegations of mutual consent to an implied contract. Consequently, the hospital's appeal from the denial of its motion for a preliminary injunction was dismissed as moot. View "Siskiyou Hospital v. County of Siskiyou" on Justia Law

Warwick Wings, LLC, a Rhode Island limited liability company operating as Hooters of Warwick, faced significant damage to its building due to snow and ice in 2015. Odeh Engineers, Inc. evaluated the damage and concluded that the roof trusses needed a full rebuild. Nadeau Corporation estimated the repair costs at $1,250,000. Warwick Wings contracted Americo Mallozzi to provide architectural plans for the repairs, agreeing to pay 11% of the final construction cost, initially estimated at $137,500. Mallozzi completed several phases of the project, but Warwick Wings only paid $46,848.55 and later claimed to have terminated the contract.Warwick Wings filed a lawsuit against its insurer, Liberty Mutual, over the scope of necessary repairs. The case was settled for $785,000, but Warwick Wings did not make further payments to Mallozzi. Mallozzi then sued Warwick Wings in Providence County Superior Court for breach of contract and unjust enrichment, seeking the remaining amount due under the contract. The Superior Court found in favor of Mallozzi, awarding him $63,151.45 in damages and $74,777.74 in attorneys' fees.The Rhode Island Supreme Court reviewed the case and affirmed the Superior Court's judgment. The Court held that the contract was unambiguous and called for a lump-sum payment based on the initial estimated construction cost. The trial justice's findings that Mallozzi completed 80% of the contract and that Warwick Wings breached the contract were upheld. The Court also found no error in the trial justice's award of attorneys' fees, concluding that there was a complete absence of a justiciable issue raised by Warwick Wings. View "Americo Mallozzi v. Warwick Wings, LLC" on Justia Law

In the spring of 2020, Colorado State University (CSU) transitioned from in-person to online learning due to the COVID-19 pandemic. Renee Alderman and Tyler Stokes, both students, filed class action lawsuits seeking refunds for tuition and fees paid for that semester, alleging CSU breached its contract to provide in-person learning and access to facilities. They also claimed unjust enrichment. The district court dismissed the breach of contract claims, citing CSU's statutory authority to suspend operations during unforeseen calamities, and later dismissed the unjust enrichment claims, ruling that the contract covered the same subject matter.Alderman appealed, and the Colorado Court of Appeals reversed the district court's dismissal of her unjust enrichment claims, holding that CSU's invocation of the statute rendered the contract unenforceable, thus allowing the unjust enrichment claims to proceed.The Supreme Court of Colorado reviewed the case and concluded that the lower court erred in holding the contract unenforceable. The court held that the statutory provision allowing CSU to suspend operations was part of the contract, and the inability to state a breach of contract claim did not render the contract itself unenforceable. Consequently, Alderman's unjust enrichment claims failed as a matter of law because a valid, enforceable contract existed covering the same subject matter. The Supreme Court reversed the appellate court's decision and directed reinstatement of the district court's judgment in favor of CSU. View "Bd. of Governors of the Colo. State Univ. v. Alderman" on Justia Law