Justia Contracts Opinion Summaries

To seek redress for an opioid epidemic, characterized by the Court of Appeal as having placed a financial strain on state and local governments dealing with the epidemic’s health and safety consequences, two California counties sued (the California Action) various pharmaceutical manufacturers and distributors, including the appellants in this matter, Actavis, Inc., Actavis LLC, Actavis Pharma, Inc., Watson Pharmaceuticals, Inc., Watson Laboratories, Inc., and Watson Pharma, Inc. (collectively, “Watson”). The California Action alleged Watson engaged in a “common, sophisticated, and highly deceptive marketing campaign” designed to expand the market and increase sales of opioid products by promoting them for treating long-term chronic, nonacute, and noncancer pain - a purpose for which Watson allegedly knew its opioid products were not suited. The City of Chicago brought a lawsuit in Illinois (the Chicago Action) making essentially the same allegations. The issue presented by this appeal was whether there was insurance coverage for Watson based on the allegations made in the California Action and the Chicago Action. Specifically, the issue was whether the Travelers Property Casualty Company of America (Travelers Insurance) and St. Paul Fire and Marine Insurance Company (St. Paul) owe Watson a duty to defend those lawsuits pursuant to commercial general liability (CGL) insurance policies issued to Watson. Travelers denied Watson’s demand for a defense and brought this lawsuit to obtain a declaration that Travelers had no duty to defend or indemnify. The trial court, following a bench trial based on stipulated facts, found that Travelers had no duty to defend because the injuries alleged were not the result of an accident within the meaning of the insurance policies and the claims alleged fell within a policy exclusion for the insured’s products and for warranties and representations made about those products. The California Court of Appeal concluded Travelers had no duty to defend Watson under the policies and affirmed. View "The Traveler's Property Casualty Company of America v. Actavis, Inc." on Justia Law

Jami Johnston appealed a judgment entered in favor of Castles and Crowns, Inc. ("Castles"). Castles was a children's clothing company formed by Julie Vickers and Amy Bowers. Brandi Stuart, Johnston's sister, worked for Castles from 2006 until 2011. From 2009 to 2010, while she was working with Castles, Stuart had 7,149 pounds of Castles' clothing shipped either to Johnston or to consignment companies used by Johnston. In January 2011, Vickers terminated Stuart's employment based on issues with her performance. In April 2011, Castles sued Stuart and Johnston, alleging conversion; civil conspiracy; "willfulness, negligence, and wantonness"; trespass to chattel; and unjust-enrichment against Johnston and Stuart. It also asserted fraudulent-misrepresentation and suppression claims against Stuart. Johnston answered, also asserting a counterclaim against Castles and a third-party complaint against Vickers. In her counterclaim and third-party complaint, Johnston alleged claims of defamation; "negligence, wantonness, and willfulness"; conspiracy; and tortious interference with business and contractual relations. She also sought recovery against Castles under the theory of respondeat superior. In this case, the trial court instructed the jury to consider Castles' unjust-enrichment claim against Johnston if it did not find against Johnston on the conversion and conspiracy claims. The jury found against Johnston on both the conversion and conspiracy claims. However, it then considered the unjust-enrichment claim and found against Johnston on that claim as well. The Alabama Supreme Court concluded the jury's verdict was inconsistent with the trial court's instructions and "was obviously the result of confusion on the part of the jury." After it had discharged the jury, the trial court acknowledged the inconsistency in the jury's verdict. The trial court attempted to cure that inconsistency by setting aside the award in favor of Castles on the unjust-enrichment claim. However, the Supreme Court found the trial court's attempt to reconcile the inconsistency in the jury's verdict was based on mere speculation about the jury's intent. Additionally, the jury failed to follow the trial court's instructions, and Johnston moved for a new trial on that ground. The Supreme Court concluded Johnston was entitled to a new trial because the jury failed to follow the trial court's instructions. For these reasons, the trial court erred when it denied Johnston's motion for a new trial. View "Johnston v. Castles & Crowns, Inc." on Justia Law

An attorney-client relationship existed between Defendants and a non-party that contractually agreed to indemnify Defendants, but because Defendants failed to request that the trial court provide written findings of fact and did not present in a timely manner the documents at issue, the trial court did not err in determining that the attorney-client privilege did not extend to the communications at issue.Plaintiff sued Defendants for payment of back rent and other charges due under a lease. Defendants notified the non-party, which agreed to indemnify and defend Defendants in accordance with their agreement. During discovery, counsel for Plaintiff requested copies of documents exchanged between Defendants and the non-party. Defendants moved for a protective order, asserting the attorney-client privilege. The trial court denied Defendants’ motion for a protective order and granted Plaintiff’s motion to compel. The court of appeals affirmed, holding that the attorney-client privilege did not extend to the communications between Defendants and the non-party. The Supreme Court modified and affirmed, holding (1) the non-party’s contractual duty to defend and indemnify Defendants created a tripartite attorney-client relationship; but (2) the trial court did not err in determining that the documents between Defendants and the non-party were not privileged. View "Friday Investments, LLC v. Bally Total Fitness of the Mid-Atlantic, Inc." on Justia Law

The Supreme Court affirmed the decision of the trial court entering judgment for Defendants in this tort action filed by a pilot injured in an airplane crash.Patrick O’Brien, a pilot who was seriously injured when the plane he was flying crashed on approach to an airport, sued the aircraft’s designer and manufacturer and the designer and manufacturer or the aircraft’s pneumatic deicing system, asserting strict liability, negligence, and fraudulent misrepresentation claims. The jury returned a general verdict for Defendants. O’Brien appealed, assigning sixty-five claims. The Supreme Court affirmed, holding that there was no merit to any of O’Brien’s assigned errors. View "O'Brien v. Cessna Aircraft Co." on Justia Law

The Supreme Court affirmed the decisions of the lower courts in this action brought by Janet Cropper against her former employers - the Roman Catholic Diocese of Covington, Saint Augustine School, and the pastor of the Saint Augustine Church (collectively, Saint Augustine) - claiming damages for, inter alia, breach of her employment contract, holding that the trial court and court of appeals did not err when they ruled that Cropper was not barred from asserting her breach of contract claim. The trial court ruled that Cropper’s claims were not barred by the ecclesiastical-abstention doctrine but ultimately ruled that, as a matter of law, Cropper could not show a breach of her employment contract. The court of appeals reversed the trial court’s determination that Cropper could not prove a breach of contract. The Supreme Court affirmed the result reached by the court of appeals and remanded for further proceedings, holding that the ecclesiastical abstention doctrine did not apply to the facts of this case. View "Saint Augustine School v. Cropper" on Justia Law

The Supreme Court affirmed the decision of the court of appeals affirming the order of the circuit court denying the University of Louisville’s (U of L) immunity against suit in this case. After Mark Rothstein’s Distinguished University Scholar (DUS) contract was terminated, Rothstein filed suit against U of L for breach of a written contract. The circuit court denied U of L’s argument that sovereign immunity barred Rothstein’s claims for breach of the written contract, finding instead that Ky. Rev. Stat. 45A, which waives immunity for breach of contract actions against the Commonwealth, was applicable to written employment contracts. The court of appeals affirmed. The Supreme Court affirmed, holding that the legislature has waived immunity for all claims arising out of lawfully authorized written contracts with the Commonwealth and its agencies. View "University of Louisville v. Rothstein" on Justia Law

This interlocutory appeal concerned a contract dispute about the provision of food services at the Fort Riley Army base in Kansas. The Department of the Army (Army) contracts with outside vendors for food preparation and related supporting services for its cafeteria dining facilities at Fort Riley. Since 2006, the State of Kansas, through the Kansas Department for Children and Families (Kansas), successfully bid under the RSA on those food preparation and related services contracts at Fort Riley. Kansas’s most recent contract awarded under the RSA was scheduled to expire in February 2016. As that date approached, the Army determined that its next dining contract at Fort Riley would be for supporting services only. The Army therefore decided that it need not solicit bids under the RSA and it approached another vendor directly, as permitted by the JWOD. Kansas took exception to the Army’s decision because it eliminated Kansas’s ability to bid on the contract. So Kansas initiated arbitration proceedings under the RSA’s dispute resolution provisions. And upon learning that the Army intended to contract with the other vendor despite the commencement of arbitration proceedings, Kansas sued in federal court, seeking to preliminarily enjoin the Army from executing the JWOD contract pending arbitration. The root of the dispute was the intersection of two federal statutes that both address the procurement of food services at federal facilities: (1) the Randolph-Sheppard Vending Facility Act of 1936 (RSA), and (2) the Javits Wagner O’Day Act (JWOD). The parties disagreed as to which of these statutes governed the award of the Fort Riley food services contract. And due to events that have occurred since this action was filed, the parties also disputed whether this appeal was rendered moot. The Tenth Circuit concluded that the issue raised by this appeal fell within an exception to the mootness doctrine for matters capable of repetition yet evading review. Because an arbitration panel has since issued its decision thereby dissolving the injunction at issue in this appeal, the Court declined to address whether the district court correctly granted the injunction. View "Kansas Department for Children v. SourceAmerica" on Justia Law

Plaintiff Vitatech International, Inc. (Vitatech) filed a breach of contract lawsuit against defendants National Marketing, Inc., CortiSlim International, formerly known as National Marketing, Inc., CortiSlim International, LLC, and Alan Sporn (collectively, Defendants). On the eve of trial, the parties settled for a one-time payment of $75,000. As part of the settlement, Defendants stipulated to entry of judgment against them “in the full prayer of the Complaint,” but Vitatech agreed to “forbear” from filing the stipulation and to accept the $75,000 “as full Settlement of its claims against Defendants” if they paid by the designated date. When Defendants failed to pay, Vitatech filed the stipulation and the trial court entered judgment against Defendants for more than $300,000, which included compensatory damages, prejudgment interest, attorney fees, and costs. Sporn and appellant CortiSlim International, Inc. (collectively, Appellants) moved to vacate the judgment, arguing it was an unenforceable penalty and liquidated damages provision under Civil Code section 1671(b). The trial court denied the motion because it found the judgment’s higher amount was not a penalty or liquidated damages provision subject to section 1671(b). Rather, the court concluded the reduced amount Vitatech agreed to accept was merely a discount if Defendants paid their debt as agreed. The Court of Appeal reversed and remanded for the trial court to grant the motion and enter a new judgment for the $75,000 settlement amount, plus trial court costs. Under well-established precedent, including this court’s decision in Greentree Financial Group, Inc. v. Execute Sports, Inc., 163 Cal.App.4th 495 (2008), the stipulated judgment for more than four times the amount Vitatech agreed to accept as full settlement of its claims was an unenforceable penalty because it bore no reasonable relationship to the range of damages the parties could have anticipated would result from Defendants’ failure timely to pay the settlement amount. “Although Defendants stipulated to entry of judgment if they did not timely pay, they never admitted liability on the underlying claims or the amount of damages allegedly caused by the breach of the underlying contract.” View "Viatech International, Inc. v. Sporn" on Justia Law

Plaintiffs are homeowners in centrally-planned neighborhoods in Thompson’s Station, Tennessee. The developers established and controlled owners’ associations for the neighborhoods but have transferred that control to third-party entities not controlled by either the developers or homeowners. While under the developers’ control, the associations each entered into agreements granting Crystal the right to provide telecommunications services to the neighborhoods for 25 years, with an option for Crystal to unilaterally renew for an additional 25 years. The Agreements make Crystal the exclusive agent for homeowners in procuring services from outside providers. Homeowners must pay the associations a monthly assessment fee, which the associations use to pay Crystal, regardless of whether the homeowner uses Crystal's service, and must pay Crystal $1,500 for the cost of constructing telecommunications infrastructure. Crystal uses service easements within the neighborhoods. Crystal had no prior experience in telecommunications-services and contracts with another provider, DirecTV, and charges homeowners a premium above the rate negotiated with DirecTV. Crystal does not provide services outside of the neighborhoods. The plaintiffs claimed that the Agreements constituted self-dealing, unjust enrichment, unconscionability, unlawful tying, and unlawful exclusivity. The Sixth Circuit reversed dismissal, in part, finding plaintiffs’ allegations plausible on their face with respect to the tying claim, but affirmed dismissal of the exclusivity claim. View "Cates v. Crystal Clear Technologies, LLC" on Justia Law

The Santa Cruz Operation, Inc. (Santa Cruz) entered into a business arrangement with International Business Machines Corp. (IBM) to develop a new operating system that would run on a more advanced processor manufactured by Intel Corporation (Intel). The parties signed an agreement memorializing this relationship, calling it “Project Monterey.” Another technology company, The SCO Group, Inc. (SCO), then acquired Santa Cruz’s intellectual property assets and filed this lawsuit for IBM’s alleged misconduct during and immediately after Project Monterey. SCO accused IBM of stealing and improperly using source code developed as part of the Project to strengthen its own operating system, thereby committing the tort of unfair competition by means of misappropriation. The district court awarded summary judgment to IBM on this claim based on the independent tort doctrine, which barred a separate tort action where there was no violation of a duty independent of a party’s contractual obligations. SCO also accused IBM of disclosing Santa Cruz’s proprietary materials to the computer programming community for inclusion in its Linux open-source operating system. In a separate order, finding insufficient evidence of actionable interference by IBM, the district court granted summary judgment in favor of IBM on these tortious interference claims. Finally, after the deadline for amended pleadings in this case, SCO sought leave to add a new claim for copyright infringement based on the allegedly stolen source code from Project Monterey. SCO claimed it had only discovered the essential facts to support this claim in IBM’s most recent discovery disclosures. The district court rejected SCO’s proposed amendment for failure to show good cause. SCO appealed. After review, the Tenth Circuit reversed the district court’s order awarding IBM summary judgment on the misappropriation claim, and affirmed as to all other issues. View "SCO Group v. IBM" on Justia Law