Justia Contracts Opinion Summaries

On August 10, 2020, a derecho caused significant damage to the plaintiffs' property in Cedar Rapids, Iowa. The plaintiffs filed a claim with their insurer, State Farm, which initially paid $2,297.26 for the damage. After further submissions and inspections, State Farm increased the payment by $3,822.68. The plaintiffs' contractor estimated the repair costs at $21,537.45, but State Farm disagreed, leading to further disputes and inspections. Eventually, the plaintiffs requested an appraisal, which set the actual cash value (ACV) at $16,155.48 and the replacement cost value (RCV) at $21,069.59. State Farm paid the plaintiffs the difference between the initial payments and the new ACV but required documentation of repairs for the RCV.The plaintiffs filed a lawsuit in state court for breach of contract and bad faith, which was removed to federal court. The district court granted summary judgment to State Farm, holding that the insurer had not breached the contract because it had paid the ACV and the plaintiffs had not completed repairs within the two-year policy deadline to claim the RCV. The court also found that State Farm had an objectively reasonable basis for its payment decisions, negating the bad-faith claim.The United States Court of Appeals for the Eighth Circuit reviewed the case. The court affirmed the district court's decision, holding that State Farm did not breach the contract as the plaintiffs failed to complete repairs within the required two-year period. The court also held that State Farm had a reasonable basis for its initial payment decisions and did not act in bad faith. The court concluded that the plaintiffs were not entitled to further payments under the policy and that State Farm's actions were justified. View "Henderson v. State Farm Fire & Casualty Co." on Justia Law

The case involves a dispute over fees related to contracts between independent solar generators (the plaintiffs) and National Grid USA Services Co., Inc. and its affiliate Niagara Mohawk Power Corporation (the defendants). The plaintiffs are required to pay costs for interconnecting their solar energy projects to the defendants' electric distribution grid, which includes a "tax gross-up adder" to offset the defendants' federal income tax liability. The plaintiffs sought a declaratory judgment that these interconnection payments are not taxable income and also sought to recover the allegedly unlawful tax-related fees through state-law claims for damages.The United States District Court for the Northern District of New York dismissed the case, finding that it lacked subject-matter jurisdiction. The court concluded that the plaintiffs' request for a declaratory judgment was barred by the Declaratory Judgment Act because the federal tax issue would only arise as a defense to a state-law breach of contract claim. The court also found that the plaintiffs' state-law claims did not raise a substantial federal question, as the federal tax issue was not significant to the federal system as a whole.The United States Court of Appeals for the Second Circuit affirmed the district court's judgment. The appellate court agreed that the plaintiffs' request for declaratory relief did not meet the threshold requirement for federal subject-matter jurisdiction, as the federal tax issue would only arise as a defense in a hypothetical state-law breach of contract claim. The court also found that the federal issue in the plaintiffs' state-law claims was not substantial, as it was fact-bound and situation-specific, and did not have broader significance for the federal government. Therefore, the district court's dismissal for lack of subject-matter jurisdiction was upheld. View "Sunvestment Energy Group NY 64 LLC v. National Grid USA Services Co., Inc." on Justia Law

In 2014, several homeowners' associations sued Baldwin County Sewer Service, LLC (BCSS), alleging that a rate increase violated a 1991 agreement between a real-estate developer and BCSS. The plaintiffs sought a declaratory judgment and specific performance of the agreement. The case has been brought before the Supreme Court of Alabama multiple times, with BCSS repeatedly questioning whether the plaintiffs are successors in interest to the original contract party.The Baldwin Circuit Court initially granted summary judgment in favor of BCSS, stating that the plaintiffs lacked standing. However, the Supreme Court of Alabama reversed this decision in 2016, clarifying that the issue was not one of standing but whether the plaintiffs were real parties in interest. On remand, BCSS continued to challenge the plaintiffs' status, leading to multiple nonfinal rulings and additional appellate proceedings. The circuit court denied BCSS's summary judgment motions on this issue multiple times, including in August 2023.The Supreme Court of Alabama reviewed BCSS's petition for a writ of mandamus, which sought to compel the circuit court to grant summary judgment in its favor. The Court clarified that the real-party-in-interest question does not implicate the trial court's subject-matter jurisdiction and is not appropriate for mandamus review. The Court emphasized that such issues should be resolved through a final judgment by the trial court. Consequently, the Supreme Court of Alabama denied BCSS's petition for a writ of mandamus. View "Ex parte Baldwin County Sewer Service, LLC" on Justia Law

Farnsworth Coleman, the sole member of Coleman Consulting, LLC (CC), entered into a written Confidentiality Agreement with Domtar A.W. LLC (Domtar A.W.) in November 2016 to provide consulting services for a pulp mill in Ashdown, Arkansas. CC was compensated for its services and expenses at an agreed hourly rate. CC later claimed that an oral agreement was made with Domtar A.W. for additional compensation based on a percentage of increased profits from CC's recommendations, which Domtar A.W. denied. CC filed a lawsuit for breach of contract and unjust enrichment after Domtar A.W. terminated the consulting services in May 2017.The United States District Court for the Western District of Arkansas granted summary judgment in favor of Domtar A.W., concluding that the Arkansas statute of frauds barred CC's breach of contract claim because the alleged oral agreement could not be performed within one year. The court also found that CC failed to prove its unjust enrichment claim, as CC had been fully compensated for its services under the written agreement. CC's motion for reconsideration, based on newly discovered evidence, was denied.The United States Court of Appeals for the Eighth Circuit reviewed the case de novo and affirmed the district court's decision. The appellate court agreed that the oral agreement was subject to the statute of frauds and could not be performed within one year. The court also found that the part performance and detrimental reliance exceptions to the statute of frauds did not apply. Additionally, the court upheld the dismissal of the unjust enrichment claim, noting that CC had been paid for its services and could not use unjust enrichment to enforce an unenforceable oral contract. The denial of the motion for reconsideration was also affirmed, as CC failed to demonstrate due diligence in obtaining the new evidence. View "Coleman Consulting, LLC v. Domtar Corporation" on Justia Law

A fire damaged a malt beverage store owned by A Maxon Company, LLC (AMC). Acuity Insurance Company sought a declaratory judgment to determine coverage under an insurance policy listing Greg and Tammy Weatherspoon as additional loss payees. The Weatherspoons counterclaimed for breach of contract. The circuit court granted Acuity’s motion for judgment as a matter of law on the Weatherspoons’ counterclaim, determining that the insurance policy terms prevented the Weatherspoons from recovering damages unless AMC successfully asserted a claim. The jury found that AMC principal, Russel Maxon, had intentionally started the fire, excluding coverage under AMC’s policy. The Weatherspoons appealed.The Circuit Court of the Fourth Judicial Circuit, Corson County, South Dakota, initially denied the Weatherspoons’ motion for summary judgment, ruling that the insurance contract was unambiguous and that the Weatherspoons’ claim was dependent on AMC’s claim. The court also denied Acuity’s motion for summary judgment, finding that there were factual disputes suitable for a jury. At trial, the court granted Acuity’s motion for judgment as a matter of law, concluding that the Weatherspoons could not recover under the policy because AMC’s claim was excluded due to Russel’s intentional act.The Supreme Court of the State of South Dakota affirmed the circuit court’s decision. The court held that the insurance policy’s Loss Payable Clause only allowed the Weatherspoons to collect if AMC could collect, and since the jury found that Russel intentionally started the fire, AMC was precluded from recovering. The court also found no abuse of discretion in admitting expert testimony from Special Agent Derek Hill and allowing the impeachment of Tracy Maxon with prior inconsistent statements. The court concluded that the Weatherspoons’ arguments regarding ambiguity and third-party beneficiary status were unavailing. View "Acuity Insurance V. A Maxon Company" on Justia Law

In a procurement dispute, the Honolulu Board of Water Supply (BWS) solicited bids for a well-drilling project and disqualified Alpha, Inc. for not having the required contractor’s license. Alpha challenged the decision administratively and judicially, arguing that its bid was responsive and that the winning bidder, Beylik/Energetic A JV, was nonresponsive. BWS maintained that the administrative hearings officer and courts lacked jurisdiction to hear the protest because Alpha did not meet the statutory requirement that the protest concern a matter worth at least ten percent of the contract’s value.The Office of Administrative Hearings (OAH) concluded that the ten percent requirement was not jurisdictional and had jurisdiction to hear Alpha’s appeal. On the merits, OAH found that Alpha’s bid was nonresponsive due to the lack of a required subcontractor listing. The Circuit Court of the First Circuit affirmed OAH’s decision, agreeing that BWS could require a C-27 license for tree removal and that Alpha’s bid was nonresponsive. The Intermediate Court of Appeals (ICA) also affirmed, holding that the ten percent requirement related to standing, not jurisdiction, and that Alpha had standing to appeal.The Supreme Court of the State of Hawai‘i reversed the ICA’s decision, holding that the ten percent requirement is jurisdictional. The court concluded that Alpha did not meet this requirement, and therefore, OAH and the courts lacked jurisdiction to review BWS’s decision. The court also provided guidance on the merits, affirming BWS’s disqualification of Alpha’s bid for not listing a required subcontractor and not having the proper license for tree removal. View "Alpha Inc. v. Board of Water Supply" on Justia Law

Plaintiffs, a group of preferred stockholders in Cedar Realty Trust, sued Cedar and its directors, alleging that a series of transactions culminating in Cedar's acquisition by Wheeler Properties devalued their preferred shares. Cedar delisted its common stock and paid common stockholders, but the preferred stock remained outstanding and its value dropped significantly. Plaintiffs claimed Cedar and its directors breached contractual and fiduciary duties by structuring the transactions to deprive them of their preferential rights. They also alleged Wheeler tortiously interfered with their contractual rights and aided Cedar's breach of fiduciary duties.The United States District Court for the District of Maryland dismissed the complaint. It found that the transactions did not trigger the preferred stockholders' conversion rights under the Articles Supplementary because Wheeler's stock remained publicly traded. The court also ruled that Maryland law does not recognize an independent cause of action for breach of the implied duty of good faith and fair dealing. Additionally, the court held that the fiduciary duty claims were duplicative of the breach of contract claims, as the rights of preferred stockholders are defined by contract. Consequently, the claims against Wheeler failed because they depended on the existence of underlying breaches of contract and fiduciary duty.The United States Court of Appeals for the Fourth Circuit affirmed the district court's decision. It held that the transactions did not constitute a "Change of Control" under the Articles Supplementary, as Wheeler's stock remained publicly traded. The court also agreed that Maryland law does not support an independent claim for breach of the implied duty of good faith and fair dealing. Furthermore, the court found that the fiduciary duty claims were properly dismissed because the directors' duties to preferred stockholders are limited to the contractual terms. Finally, the claims against Wheeler were dismissed due to the absence of underlying breaches by Cedar and its directors. View "Kim v. Cedar Realty Trust, Inc." on Justia Law

In 2018, North American Senior Benefits, LLC (NASB) entered into employment contracts with Ryan and Alisha Wimmer, which included a restrictive covenant prohibiting them from recruiting NASB employees for two years post-termination. In 2021, after the Wimmers left NASB and allegedly started a competing business, NASB sued to enforce the covenant. The Wimmers argued that the covenant was unenforceable due to the lack of an express geographic term.The Statewide Business Court agreed with the Wimmers and granted their motion for judgment on the pleadings, finding the covenant unenforceable without an express geographic term. The Court of Appeals affirmed this decision, relying on its prior ruling in CarpetCare Multiservices v. Carle, which held that a restrictive covenant must include an express geographic term to comply with OCGA § 13-8-53 (a). One judge dissented, arguing that the GRCA does not require an express geographic term for non-recruitment provisions.The Supreme Court of Georgia reviewed the case and concluded that the Court of Appeals erred. The Supreme Court held that OCGA § 13-8-53 (a) does not mandate an express geographic term for a restrictive covenant to be enforceable. Instead, the statute requires that the restrictions be reasonable in time, geographic area, and scope of prohibited activities. The Court emphasized that the reasonableness of a covenant's geographic scope should be assessed based on the totality of the circumstances, not solely on the presence of an express geographic term.The Supreme Court reversed the judgment of the Court of Appeals and remanded the case for further proceedings to determine the reasonableness of the non-recruitment provision under the GRCA. View "NORTH AMERICAN SENIOR BENEFITS, LLC v. WIMMER" on Justia Law

American Building Innovation LP (ABI) was hired by Balfour Beatty Construction, LLC (Balfour Beatty) as a subcontractor for a school construction project. ABI had a workers’ compensation insurance policy when it began work, but the policy was canceled due to ABI’s refusal to pay outstanding premiums from a previous policy. This cancellation led to the automatic suspension of ABI’s contractor’s license. Despite knowing it was unlicensed and uninsured, ABI continued working on the project.The Superior Court of Orange County found that ABI was not duly licensed at all times during the performance of its work, as required by California law. ABI’s license was suspended because it failed to maintain workers’ compensation insurance. ABI later settled its premium dispute and had the policy retroactively reinstated, but the court found this retroactive reinstatement meaningless because it occurred long after the statute of limitations for any workers’ compensation claims had expired. The court ruled that ABI could not maintain its action to recover compensation for its work due to its lack of proper licensure.The California Court of Appeal, Fourth Appellate District, Division Three, affirmed the lower court’s judgment. The court held that ABI was not entitled to retroactive reinstatement of its license because the failure to maintain workers’ compensation insurance was not due to circumstances beyond ABI’s control. ABI’s decision not to pay the premiums and its false representations to the Contractors’ State License Board were within its control. Consequently, ABI was barred from bringing or maintaining the action under section 7031 of the Business and Professions Code. The court also affirmed the award of attorney fees to Balfour Beatty under the subcontract’s prevailing party attorney fee provision. View "American Building Innovations v. Balfour Beatty Construction" on Justia Law

Dyax Corporation performed research for Ares Trading S.A. and licensed patents to Ares, including some held by Cambridge Antibody Technology (CAT Patents). Ares used Dyax’s research to develop a cancer drug, Bavencio, and agreed to pay royalties to Dyax based on the drug’s sales. The royalty obligation outlasted the lifespan of the CAT Patents. The District Court held that Ares’ royalty obligation was not unenforceable under Brulotte v. Thys Co., which prohibits royalties that extend beyond a patent’s expiration.The United States District Court for the District of Delaware found that Ares’ royalty obligation did not violate Brulotte because it was not calculated based on activity requiring the use of inventions covered by the CAT Patents after their expiration. The court characterized the royalties as deferred compensation for Dyax’s pre-expiration research. Additionally, the court noted that Ares’ royalty obligation could run until the latest-running patent covered in the agreement expired, which included patents other than the CAT Patents.The United States Court of Appeals for the Third Circuit affirmed the District Court’s decision. The Third Circuit held that Ares’ royalty obligation was not calculated based on activity requiring post-expiration use of the CAT Patents, and thus, Brulotte did not apply. The court emphasized that the royalties were based on sales of Bavencio, which did not require the use of the CAT Patents after their expiration. The court also rejected Ares’ argument that Dyax violated the implied covenant of good faith and fair dealing, noting that Ares received all the benefits promised under the agreement. The court concluded that Dyax did not breach any obligations under the agreement, and Ares’ royalty obligation remained enforceable. View "Ares Trading SA v. Dyax Corp" on Justia Law