Justia Contracts Opinion Summaries

In the 1990s, Stryker purchased a Pfizer subsidiary that made orthopedic products, including the “Uni-knee” artificial joint. It was later discovered that those devices were sterilized using gamma rays, which caused polyethylene to degrade. If implanted past their five-year shelf-life, the knees could fail. Expired Uni-Knees were implanted in patients. Stryker, facing individual product-liability claims and potentially liable to Pfizer, sought defense and indemnification under a $15 million XL “commercial umbrella” policy, and a TIG “excess liability” policy that kicked in after the umbrella policy was fully “exhausted.” XL denied coverage, arguing that the Uni-Knee claims were “known or suspected” before the inception of the policy. Stryker filed lawsuits against the insurers, then unilaterally settled its individual product-liability claims for $7.6 million. Stryker was adjudicated liable to Pfizer for $17.7 million. About 10 years later, the Sixth Circuit held that XL was obliged to provide coverage. XL paid out the Pfizer judgment first, exhausting coverage limits. TIG declined to pay the remaining $7.6 million, arguing that Stryker failed to obtain “written consent” at the time the settlements were made. Stryker claimed that the policy was latently ambiguous because XL satisfied the Pfizer judgment first, Stryker was forced to present its settlements to TIG years after they were made. The district court granted Stryker summary judgment. The Sixth Circuit reversed, finding the contract unambiguous in requiring consent. View "Stryker Corp. v. National Union Fire Insurance Co." on Justia Law

Bugs “R” Us, LLC (BRU) appealed the denial of its motion to compel arbitration in an action filed by Autumn McCants for negligent and/or wanton termite inspection of a house she purchased. After review, the Supreme Court concluded that BRU met its burden of establishing the existence of an arbitration contract between the parties. Furthermore, the arbitration provision dictated that the issues McCants raised about the applicability of the Federal Arbitration Act to this dispute, whether her claims were subsumed under the arbitration provision, and whether she was bound by the arbitration provision had to be submitted to an arbitrator for determination. Therefore, the trial court's order denying RU's motion to compel arbitration was reversed and the matter remanded for further proceedings. View "Bugs "R" Us, LLC v. McCants" on Justia Law

Advanced Specialty Pharmacy LLC, Meds I.V., Inc. (collectively referred to as "Meds I.V."), and several others were sued by individuals asserting various wrongful-death and personal-injury claims. Meds I.V. was insured by Pharmacists Mutual Insurance Company. Pharmacists Mutual filed an interpleader complaint in the action and submitted $4 million to the circuit court, which Pharmacists Mutual alleged was the limits to Meds I.V.'s insurance policies with it, and requested that the circuit court divide the insurance moneys among the claimants. The claimants alleged that the policy limits were $7 million. The parties filed cross-motions for a summary judgment, and the circuit court entered a summary judgment in favor of the claimants. The Supreme Court affirmed the summary judgment insofar as it held that the general aggregate limit applied to limit Pharmacists Mutual's liability to $4 million. However, the Court reversed the circuit court's judgment insofar as it held that the products/completed-work-hazard aggregate limit also applied to expand Pharmacists Mutual's liability by $3 million to $7 million. The case was remanded back to the circuit court for further proceedings. View "Pharmacists Mutual Ins. Co. v. Advanced Specialty Pharmacy, LLC" on Justia Law

This action arose from the murder of a teenager by her two friends. The victim’s parents filed a wrongful death action against the killers and the two women they lived with, Tara Clendenen and Rachel Shoaf. Clendenen and Shoaf were insured under homeowner’s insurance policies issued by American National Property and Casualty Company (ANPAC) and Erie Insurance Property and Casualty Company (Erie). Although not parties to the state court action, ANPAC and Erie filed declaratory judgment actions in the federal district court seeking a determination that the homeowner’s insurance policies did not provide coverage for the claims being asserted in the complaint and that the insurers had no duty to defend or indemnify the defendants. The federal court found that it was unclear whether coverage was available to Sheaf and Clendenen in the state court action and certified questions to the Supreme Court. The Supreme Court held (1) the unambiguous intentional/criminal acts exclusions in the insurers’ policies precluded liability coverage to Clendenen and Shoaf for the claims in the underlying case because the murder was expected or intended by the killers, co-insureds under their respective policies; and (2) the unambiguous severability clauses in the insurers’ policies did not prevail over the unambiguous intentional/criminal acts exclusions. View "American National Property & Casualty Co. v. Clendenen" on Justia Law

In 2010, EFIH borrowed $4 billion at a 10% interest rate, issuing notes secured by its assets; the Indenture states that EFIH may redeem the notes for the principal amount plus a “make-whole premium” and accrued, unpaid interest. It contains an acceleration provision that makes “all outstanding Notes . . . due and payable immediately” if EFIH files for bankruptcy. Interest rates dropped. Refinancing outside of bankruptcy would have required EFIH to pay the make-whole premium. EFIH disclosed to the Securities and Exchange Commission a “proposal [whereby] . . . EFIH would file for bankruptcy and refinance the notes without paying any make-whole amount.” EFIH later filed Chapter 11 bankruptcy petitions, seeking leave to borrow funds to pay off the notes and to offer a settlement to note-holders who agreed to waive the make-whole. The Trustee sought a declaration that refinancing would trigger the make-whole premium and that it could rescind the acceleration without violating the automatic stay. The Bankruptcy Court granted EFIH’s motion to refinance. EFIH paid off the notes and refinanced at a much lower interest rate; the make-whole would have been approximately $431 million. The Bankruptcy Court and district court concluded that no make-whole premium was due and that the noteholders could not rescind acceleration. The Third Circuit reversed. The premium, meant to give the lenders the interest yield they expect, does not fall away because the full principal amount becomes due and the noteholders are barred from rescinding acceleration of debt. View "In re: Energy Future Holdings Corp." on Justia Law

Plaintiff, a resident of Florida, was a resident of Rhode Island at the time of the contract in dispute. Defendant was a resident of New York. Plaintiff entered into a contract in New York regarding Plaintiff’s employment to serve as captain of Defendant’s sailboat. After Plaintiff was terminated, Plaintiff filed suit in a Rhode Island court, alleging breach of contract. Defendant answered, averring that Rhode Island did not have personal jurisdiction over him. The case proceeded to trial, and the trial justice concluded that Rhode Island could not exercise personal jurisdiction over Defendant. The Supreme Court vacated the judgment of the superior court, holding that Defendant forfeited his jurisdictional defense of lack of personal jurisdiction through unjustified delay and active participation in litigation proceedings. View "Pullar v. Cappelli" on Justia Law

Scott and Dawn Smith (together, Insureds) filed an insurance claim with Erie Insurance Company (Insurer) seeking uninsured-motorist coverage as a result of injuries suffered by Scott in a no-contact accident allegedly caused by an unidentified vehicle. Insurer denied the claim. The trial court granted summary judgment to Insurer, concluding that a provision in the policy requiring Insureds to provide “independent corroborative evidence” that the unknown driver caused the injury meant that Insureds had to submit evidence, independent of Scott’s own testimony, corroborating that the accident was caused by an unknown motorist, and this they failed to do. The court of appeals reversed. The Supreme Court affirmed, holding that the policy’s requirement of independent corroborative evidence could be met using evidence derived from the insured’s testimony. View "Smith v. Erie Insurance Co." on Justia Law

Plaintiffs, on behalf of themselves and others similarly situated, were former students in the nursing program at Salem International University (Salem). When Plaintiffs enrolled, they signed enrollment agreements that contained an arbitration clause. Plaintiffs filed a putative class action complaint against Salem and its president (collectively, Salem) alleging that they were denied the opportunity to complete their coursework in nursing at Salem as a result of the nursing program’s loss of accreditation. Salem filed a motion to stay proceedings pending mandatory alternative dispute resolution. The circuit court denied the motion, concluding that the arbitration agreement did not include an enforceable class action litigation waiver. The Supreme Court reversed, holding that the arbitration agreement acted as a class action litigation waiver barring Plaintiffs from seeking judicial relief as a class. View "Salem International University v. Bates" on Justia Law

In 1994, Rocky Mountain and the Bureau of Land Management entered into the Helium Contract, giving Rocky Mountain the right, for up to 25 years, to extract helium gas from roughly 21,000 acres of federal lands in Colorado and Utah. Rocky Mountain never extracted helium from the property and, after one year, stopped paying rent. In 2004, the Bureau informed Rocky Mountain that it had cancelled the contract due to nonpayment. The parties entered into a Settlement Agreement, under which the Bureau was required to provide Rocky Mountain with data about gas composition on the land covered by the Helium Contract and Rocky Mountain had to pay $116,579.90 (back rent) so that the Helium Contract would be reinstated. Rocky Mountain subsequently objected that the Bureau's information as incomplete, refused to pay the $116,579.90, and informed the Bureau that it wanted to pursue mediation under the Agreement. When the parties were unable to agree whether the information was complete, the Bureau sent a termination letter. The Claims Court rejected Rocky Mountain’s breach of contract suit for lack of jurisdiction and on the merits. The Federal Circuit agreed that the Helium Contract was terminated in 2004 and never reinstated, but found that the court had jurisdiction over the Settlement Agreement dispute. View "Rocky Mountain Helium, LLC v. United States" on Justia Law

Plaintiffs appealed the district court's conclusion that defendant, a licensed bail bond agent, was entitled to retain the bond premium in this case even though bail was denied. The court certified to the Court of Appeals of the State of New York the following question: Whether an entity engaged in the “bail business,” as defined in NYIL 6801(a)(1), may retain its “premium or compensation,” as described in NYIL 6804(a), where a bond posted pursuant to NYCPL 520.20 is denied at a bail-sufficiency hearing conducted pursuant to NYCPL 520.30, and the criminal defendant that is the subject of the bond is never admitted to bail. View "Gevorkyan v. Judelson" on Justia Law