Justia Contracts Opinion Summaries

A franchisee janitorial worker, on behalf of himself and other similarly situated individuals, filed a complaint against System4 LLC, a master franchisor, and NECCS, Inc., a regional subfranchisor, alleging, among other claims, breach of contract, misclassification as independent contractors in their franchise agreements, and rescission of the franchise agreements. The franchise agreements, signed only by Plaintiffs and NEECS, required the franchisees to arbitrate virtually all disputes. Defendants, citing the arbitration clause in the franchise agreement, moved to stay the court proceedings pending arbitration. The judge concluded that because System4 was not a nonsignatory to the agreements, Plaintiffs could proceed to litigate their claims against System4 in court. The Supreme Judicial Court reversed, holding that, by reason of equitable estoppel, System4 could compel Plaintiffs to arbitrate their substantive claims in accordance with the arbitration provision in Plaintiffs’ franchise agreements. Remanded. View "Machado v. System4 LLC" on Justia Law

American Messaging Services, LLC (AMS) purchased an ownership interest in DocHalo, LLC. The parties entered into an agreement establishing the terms of their business relationship. After AMS discovered that DocHalo had contacted some of AMS’s sales personnel about joining DocHalo and had unilaterally reached out to some of AMS’s customers, AMS filed a complaint alleging breach of contract, breach of the implied covenant of good faith and fair dealing, misappropriation of trade secrets, and tortious interference with contractual relations. AMS sought a temporary restraining order seeking DocHalo from contacting its customers and sales personnel. The Court of Chancery denied the motion, holding that while AMS established colorable claims against DocHalo, it did not appear to face imminent and irreparable harm that would justify extraordinary relief. View "Am. Messaging Servs., LLC v. DocHalo, LLC" on Justia Law

Old Colony Construction, LLC failed timely to complete a public works contract with the Town of Southington. The Town elected to terminate the contract on the basis of convenience. Old Colony subsequently filed suit against the Town alleging breach of contract. The Town counterclaimed seeking liquidated damages for breach of contract. The trial court rendered judgment in favor of Old Colony on its breach of contract claim and in favor of the Town on its liquidated damages counterclaim. The court awarded the Town liquidated damages and permitted the set off of those damages against the damages awarded to Old Colony for the Town’s failure to pay sums due under the contract’s termination for convenience provision. Old Colony appealed, arguing that the Town was barred from collected liquidated damages because termination for convenience precludes any default based remedies available for termination for cause and because the Town’s contribution to the delay rendered the liquidated damages provision unenforceable. The Supreme Court affirmed, holding that the trial court properly awarded liquidated damages and properly denied Old Colony’s request for an equitable adjustment in the contract. View "Old Colony Constr., LLC v. Town of Southington" on Justia Law

Petitioner, an attorney, and Respondent, a non-lawyer, entered into a fee-sharing agreement in connection with certain lawsuits. Petitioner later filed a complaint seeking a declaratory judgment on the issue of whether Respondent was entitled to compensation for services he performed in relation to the litigation, seeking a ruling as to whether a sharing of legal fees with Respondent would violate Rule 5.4 of the West Virginia Rules of Professional Conduct. The federal district court certified the following question to the Supreme Court: “Are the West Virginia Rules of Professional Conduct statements of public policy with the force of law equal to that given to statutes enacted by the West Virginia State Legislature?” The Supreme Court affirmed the question, as modified, in the affirmative, holding (1) Rule 5.4, which proscribes the sharing of fees between lawyers or law firms and non-lawyers, is an explicit judicial declaration of West Virginia public policy with the force and effect of law; and (2) accordingly, a fee-sharing agreement between a lawyer or law firm and the non-lawyer that violates the provisions of Rule 5.4 is void as against public policy and wholly unenforceable. View "Rich v. Simoni" on Justia Law

Shasta Linen Supply, a California corporation, applied for workers’ compensation insurance coverage from Applied Underwriters, a Nebraska corporation. Shasta accepted Applied’s proposed policy through an agreement entitled a Request to Bind Coverages & Services. On the same day, Shasta entered into a Reinsurance Participation Agreement (RPA) with Applied Underwriters Captive Risk Assurance Company (AUCRA), Applied’s subsidiary and a British Virgin Islands corporation. The request to bind and the RPA contained conflicting provisions regarding the parties’ arbitration process for resolving disputes. After a dispute arose regarding the amount of money that Shasta owed to Applied, the American Arbitration Association (AAA) acknowledged receipt of AUCRA’s demand for arbitration. Shasta filed a complaint seeking a declaratory judgment that the request to bind required arbitration by "JAMS" in Omaha, Nebraska and injunctive relief from the AAA arbitration. The court determined that it had jurisdiction to decide which contract provision controlled and issued a temporary injunction and stay of the AAA arbitration until it decided the parties’ rights. Applied and AUCRA appealed, arguing that the court erred in exercising jurisdiction over the parties’ contract dispute and granting a temporary injunction. The Supreme Court dismissed the appeal, holding that the court’s temporary injunction and stay was an interlocutory order that was not appealable. View "Shasta Linen Supply, Inc. v. Applied Underwriters, Inc." on Justia Law

Appellant, a franchisor of professional cleaning and maintenance services, granted Appellee a franchise in the Omaha, Nebraska area. After Appellant discovered that Appellee was diverting Appellant’s customers to his new business, Appellant terminated its relationship with Appellee. Appellant then filed this lawsuit against Appellee seeking to enforce and receive damages from the breach of the noncompete clause in the franchise agreement. The district court entered judgment for Appellee, concluding that the noncompete clause included an unreasonable restraint on competition. In so ruling, the court refused to sever the offending subpart from the larger noncompete clause. The Supreme Court affirmed after reaffirming its stance against severability of noncompete clauses, holding that the noncompete covenant was invalid and unenforceable and that the district court correctly refused to sever the offending subpart from the larger noncompete clause. View "Unlimited Opportunity, Inc. v. Waadah" on Justia Law

Castle Properties, Inc. held a right of first refusal on approximately 2.4 acres of unimproved land owned by the Wasilla Lake Church of the Nazarene (Church). The City of Wasilla offered the Church another parcel of approximately 17 acres in exchange for this property. Having learned of the City’s offer, Castle requested a copy of the purchase and sale agreement memorializing the exchange. The Church, apparently unaware of the right of first refusal, denied this request. Castle then informed the Church that it was exercising its right and submitted a cash offer, which the Church rejected. Castle filed suit, and the superior court found that Castle received adequate notice when it obtained the city ordinance approving the City’s offer and that the Church acted reasonably in rejecting Castle Properties’ competing cash offer. After review, the Supreme Court concluded that the superior court did not clearly err in finding that Castle received adequate notice, that Castle exercised its rights by making a competing offer, and that the Church’s response did not violate the covenant of good faith and fair dealing. View "Castle Properties, Inc. v. Wasilla Lake Church of the Nazarene" on Justia Law

Customers of a securities firm made claims against that firm based on real estate investments the firm’s broker-dealers recommended. An entity that had an interest in and operated each of the real estate investments filed for bankruptcy, and at least some of the real estate investments became debtors in that bankruptcy proceeding. The appointed examiner in the bankruptcy proceeding found that the entity was engaged in a fraudulent “Ponzi scheme.” When the securities firm applied for professional liability insurance, it disclosed one of the customer claims but not the facts that would support other potential customer claims arising out of investments through the same entity as that involved in the disclosed claim. The insurer refused to defend against undisclosed claims because the policy’s application included an exclusion for nondisclosure of facts that might lead to a claim. The court of appeal affirmed judgment in favor of the insurer: There was no insurance coverage because all of the undisclosed claims arose out of the same events as the disclosed claim. The securities firm was aware of facts and circumstances that might result in a claim or claims being made against it, which awareness it was required to disclose. View "Crown Capital Secs., L.P. v. Endurance Am. Specialty Ins. Co." on Justia Law

In this putative nationwide class action Plaintiffs claimed that they were deceived into purchasing Defendants’ “natural” cosmetics, which contained allegedly synthetic and artificial ingredients. Plaintiffs sought injunctive relief and damages under the federal Magnuson-Moss Warranty Act, California’s unfair competition and false advertising laws, and common law theories of fraud and quasi-contract. The district court dismissed the quasi-contract cause of action for failure to state a claim and dismissed the state law claims under the primary jurisdiction doctrine so that the parties could seek expert guidance from the Food and Drug Administration (FDA). A panel of the Ninth Circuit reversed, holding (1) the Food, Drug, and Cosmetic Act does not expressly preempt California’s state law causes of action that create consumer remedies for false or misleading cosmetics labels; (2) although the district court properly invoked the primary jurisdiction doctrine, it erred by dismissing the case rather than staying proceedings while the parties sought guidance from the FDA; and (3) the district court erred in dismissing the quasi-contract cause of action as duplicative of or superfluous to Plaintiffs’ other claims. View "Astiana v. Hain Celestial Group, Inc." on Justia Law

Tenant was the successor lessee to a thirty-year lease on a commercial property in Brattleboro. The lease was executed in 1987. The lease established a basic annual rent of $26,500 in paragraph 8, and then set forth how the rent would increase in subsequent years. Pursuant to the rent-increase provision, each year landlords calculated the annual rent increase and sent a notice to tenant. The increase was calculated as the percentage change in the CPI from the previous year to the current year multiplied by the previous year's rent. This increase was then added to the prior year's rent to arrive at the new annual rent. In March 2007, tenant assumed the lease. From 2008 to 2012, landlords sent rent-increase notices and tenant paid rent annually adjusted for increases, calculated according to this method, without objection. In 2013, landlords sent the annual rent increase notice to tenants. The notice reflected the new 2013 rent as $54,060. Tenant objected to the amount of rent and the calculation method for rental increases. The parties were unable to resolve their dispute, and tenant filed an action seeking both a declaration that its interpretation of the lease language was correct and damages for overpaid rent. Tenant appealed the court's order granting summary judgment in favor of defendant landlords on the parties' dispute concerning a rental-increase provision of the lease. Tenant argued on appeal that the court erred in using extrinsic evidence to interpret a portion of the lease tenant believed was unambiguous, and in reaching an inequitable result. Finding no reversible error, the Supreme Court affirmed. View "B&C Management Vermont, Inc. v. John, Ringey & Beck" on Justia Law