Justia Contracts Opinion Summaries

During the COVID-19 pandemic, Congress established the Paycheck Protection Program (PPP) to help eligible small businesses maintain payroll through government-mandated shutdowns. The program, administered by the Small Business Administration (SBA), provided for government-guaranteed loans to qualifying businesses, with the possibility of loan forgiveness if certain conditions were met. Bruckner Truck Sales received a $10 million PPP loan, but the SBA later determined that Bruckner was not eligible for the loan. Despite conceding its ineligibility, Bruckner refused to return the funds and instead claimed entitlement to loan forgiveness under the CARES Act.The United States District Court for the Northern District of Texas reviewed the case after Bruckner challenged the SBA’s denial of forgiveness. The district court granted summary judgment in favor of the government, holding that the CARES Act does not entitle ineligible borrowers to loan forgiveness. The court also denied Bruckner’s motion to alter or amend the judgment, finding that the SBA’s interpretation of the statute was correct and that the agency’s actions were not arbitrary or capricious.On appeal, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s decision. The Fifth Circuit held that the CARES Act limits loan forgiveness to borrowers who were eligible for the underlying PPP loan. The court rejected Bruckner’s arguments that the SBA’s rule was retroactive, that the agency violated the Chenery doctrine, and that the district court improperly deferred to the agency’s interpretation. The court concluded that neither the text nor the structure of the CARES Act supports forgiveness for ineligible borrowers, and affirmed the denial of loan forgiveness and the requirement to return the funds. View "Bruckner Truck Sales v. Guzman" on Justia Law

Several individuals formed a corporation, each contributing initial capital and later making additional cash contributions to meet the company’s needs. These later contributions were documented as promissory notes, including three notes issued to one founder, which were subsequently held by a trust after his death. The notes specified a 24-month term, a fixed interest rate, and repayment terms, but did not explicitly state they were payable on demand. After the founder’s death, the trust demanded payment on the notes, but the company refused, arguing the notes were not yet due, were actually capital contributions, or were subordinate to other shareholder loans.The District Court of Albany County dismissed claims by other shareholders seeking priority repayment, finding no justiciable controversy, and resolved the remaining issues on summary judgment. The court determined the notes were loans, not capital contributions, and that all founders’ notes should be repaid equitably if any were repaid. However, it found the notes were not immediately due and payable, as they lacked a demand provision, and denied the trust’s request for immediate payment. The court did award attorney fees to the trust under the terms of the notes.The Supreme Court of Wyoming reviewed the case and reversed the district court’s finding that the notes were not due and payable, holding that the notes matured after 24 months and were enforceable at that time. The court affirmed that the notes were loans, not capital contributions, and declined to give priority to other shareholder loans, finding no contractual basis for subordination. The court also affirmed the award of attorney fees to the trust and upheld the dismissal of the other shareholders’ claims for lack of a justiciable controversy. The case was remanded for entry of judgment in favor of the trust and determination of reasonable attorney fees and costs. View "King v. Sheesley" on Justia Law

Two companies, HBKY and Elk River, each claimed rights to thousands of acres of timber in Kentucky based on their respective contracts with a third party, Kingdom Energy Resources. Kingdom had entered into a timber sales contract with Elk River, allowing Elk River to cut and remove timber from certain land. Separately, Kingdom obtained a $22 million loan from a group of lenders, with HBKY acting as their agent, and mortgaged several properties—including the timber in question—as collateral for the loan. Kingdom later breached both agreements: it ousted Elk River from the land, violating the timber contract, and defaulted on the loan, leaving both HBKY and Elk River with competing claims to the timber.After HBKY secured a judgment in a New York federal court declaring Kingdom in default, it registered the judgment in the United States District Court for the Eastern District of Kentucky and initiated foreclosure proceedings on the collateral, including the timber. Elk River and its president, Robin Wilson, were joined as defendants due to their claimed interest. The district court granted summary judgment to HBKY, finding that Elk River did not obtain title to the timber under its contracts, did not have a superior interest, and was not a buyer in the ordinary course of business under Kentucky law.The United States Court of Appeals for the Sixth Circuit reviewed the case de novo. The court held that the loan documents did not authorize a sale of the timber free of HBKY’s security interest, as the mortgage explicitly stated that the security interest would survive any sale. The court also found that Elk River failed to provide sufficient evidence to establish its status as a buyer in the ordinary course of business. Accordingly, the Sixth Circuit affirmed the district court’s grant of summary judgment in favor of HBKY. View "HBKY, LLC v. Elk River Export, LLC" on Justia Law

ADA Carbon Solutions (Red River), LLC ("ADA") filed a lawsuit against Atlas Carbon, LLC ("Atlas") in the United States District Court for the District of Wyoming, alleging breach of contract and breach of the implied covenant of good faith and fair dealing under Wyoming law. ADA claimed that Atlas breached their contract for the sale of activated carbon by improperly invoking the "Force Majeure" clause and failing to supply the agreed-upon quantity of carbon. ADA filed an amended complaint asserting diversity jurisdiction under 28 U.S.C. § 1332(a)(1).The district court accepted jurisdiction and, after a bench trial, awarded ADA $76,000 in damages. ADA appealed the district court's judgment, dissatisfied with the method for calculating damages. During the appeal, the Tenth Circuit Court of Appeals identified potential jurisdictional defects, specifically regarding the complete diversity of citizenship between the parties. The court ordered supplemental briefing to clarify the citizenship of Atlas's members, including trusts and limited partnerships involved.The Tenth Circuit Court of Appeals found that it lacked sufficient information to determine whether complete diversity of citizenship existed at the time of filing. The court noted that Atlas's identification of its members, including trusts and limited partnerships, was incomplete and did not provide adequate information about their citizenship. Consequently, the court vacated the judgment and remanded the case to the district court to make the necessary factual findings to determine whether it had diversity jurisdiction under 28 U.S.C. § 1332. The district court was instructed to analyze the citizenship of all members of ADA and Atlas, tracing through all layers of ownership to ensure complete diversity. View "ADA Carbon Solutions (Red River) v. Atlas Carbon" on Justia Law

Kevin and Jeannine Extreme appealed from the Fourth Judicial District Court, Mineral County's order enjoining them from violating restrictive covenants applicable to their property in the Sloway Flats Minor Subdivision. The District Court also ordered them to remedy their violations and awarded attorney fees to Sloway Cabin, LLC (Sloway).The District Court found that the covenants were enforceable and that the Extremes had violated them by operating a commercial towing company, diesel repair shop, and impound lot on their property, among other activities. The court enjoined the Extremes from further violations and ordered them to remedy their current violations. The court also awarded attorney fees to Sloway.The Supreme Court of the State of Montana reviewed the case. The court held that the Subdivision’s covenants were clear and unambiguous, and therefore enforceable. The court rejected the Extremes' arguments that the covenants were never meant to be enforced and that their enforcement was barred by the doctrines of waiver and laches. The court found that the Extremes had been repeatedly informed about the covenants and that Sloway had promptly acted to enforce them upon noticing violations. The court also found that the Extremes' arguments regarding the use of surrounding properties were irrelevant as those properties were not subject to the Subdivision’s covenants.The Supreme Court affirmed the District Court’s decision, holding that the District Court did not manifestly abuse its discretion by enjoining the Extremes from violating the covenants and that the award of attorney fees to Sloway was proper under the circumstances. The court found that the equities supported an award of attorney fees and that the tangible parameters test was met. View "Sloway Cabin v. Extreme" on Justia Law

The appellants, Banoka S.à.r.l. and others, sought third-party discovery under 28 U.S.C. § 1782 from Elliott Management Corp. and related entities for use in a contemplated fraud lawsuit in England. The dispute arose from a failed transaction involving the sale of a Paris hotel, where Westmont International Development Inc. was the potential buyer, and the Elliott entities were to provide funding. Banoka alleged that Westmont acted in bad faith during negotiations, leading to the collapse of the deal.The United States District Court for the Southern District of New York denied Banoka's petition for discovery from Elliott Management Corp. and its affiliates, but allowed limited discovery from the Elliott Funds. The court found that the forum-selection clause in the agreement between Banoka and Westmont, which designated English courts for dispute resolution, weighed against granting the petition. Additionally, the court determined that Banoka's discovery requests were overly broad and burdensome, particularly since the relevant documents and custodians were primarily located abroad.The United States Court of Appeals for the Second Circuit reviewed the case and affirmed the district court's decision. The appellate court held that the district court did not abuse its discretion in considering the forum-selection clause as a factor against granting the discovery petition. The court also found no error in the district court's conclusion that the discovery requests were unduly burdensome, given their broad scope and the foreign location of the documents and custodians. The appellate court emphasized that the district court's careful and contextual analysis of the relevant factors was appropriate and within its discretion. View "Banoka S.à.r.l. v. Elliott Mgmt. Corp." on Justia Law

Alan Juliuson rented three tracts of farmland from various owners, collectively referred to as Johnson, for over 40 years. In 2018, he contracted to farm the property until December 2021, with an option to renew and a right of first refusal to purchase the property. Towards the end of the lease, Johnson proposed new lease terms that increased the rent, removed the right of first refusal, and included a termination clause if the property was sold. Juliuson did not respond to these terms and later offered to purchase the property, which Johnson rejected, selling it instead to Bjerke Holdings, LLLP.Juliuson sued Johnson, Bjerke, and Farmers National Company (FNC) for various claims, including breach of contract, specific performance, and deceit. The district court dismissed several claims through summary judgment and ruled against Juliuson on others after a jury trial. The jury found no breach of the right of first refusal or the option to renew. Juliuson’s post-trial motions for judgment as a matter of law were denied.The North Dakota Supreme Court reviewed the case and affirmed the district court’s decisions. The court held that sufficient evidence supported the jury’s verdict that Johnson did not breach the lease renewal option or the right of first refusal. The court also upheld the dismissal of Juliuson’s claims for specific performance, finding no breach of contract to warrant such a remedy. Additionally, the court affirmed the dismissal of the claims for breach of the implied covenant of good faith and fair dealing and deceit, as these claims were not supported by independent tortious conduct separate from the alleged breach of contract. The district court’s judgment dismissing Juliuson’s claims with prejudice was affirmed. View "Juliuson v. Johnson" on Justia Law

Paul Kim, a California resident, purchased an Airstream motorhome from a dealer in California. The warranty agreement for the motorhome included an Ohio choice of law provision and an Ohio forum selection clause. Kim sued Airstream in California, alleging violations of the Song-Beverly Consumers Warranty Act. Airstream moved to stay the lawsuit in favor of the Ohio forum, citing the forum selection clause. Kim opposed, arguing that enforcing the forum selection clause would diminish his unwaivable rights under the Song-Beverly Act.The Superior Court of Los Angeles County severed the choice of law provision as illegal under the Song-Beverly Act’s waiver prohibition but granted Airstream’s motion to stay, concluding that enforcing the forum selection clause would not diminish Kim’s unwaivable California rights. The court relied on Airstream’s stipulation to apply the Song-Beverly Act in the Ohio forum.The California Court of Appeal, Second Appellate District, reviewed the case. The court affirmed the lower court’s decision to sever the choice of law provision but reversed the decision to stay the case. The appellate court held that Airstream’s stipulation was insufficient to meet its burden of proving that enforcing the forum selection clause would not diminish Kim’s unwaivable rights. The court instructed the trial court to allow Airstream the opportunity to demonstrate that Ohio conflict of law principles would require the application of the Song-Beverly Act to Kim’s claims, thereby protecting his unwaivable rights. The case was remanded for further proceedings consistent with this opinion. View "Kim v. Airstream" on Justia Law

Michael J. Kiely, an Irish resident, and MDMK Ltd., an Irish corporation, filed a lawsuit against HYPH (USA), Inc., HYPH Corporation, XHAIL, Inc., and several individual defendants. The plaintiffs alleged that the defendants conspired to fraudulently induce Kiely to sell shares of a company he founded at a significant discount, subsequently transferring most of those shares to a new company, thereby depriving Kiely of any ownership interest in the new company.The Superior Court of Los Angeles County granted the defendants' motion to stay or dismiss the action, determining that the case should be heard in Sweden based on a mandatory forum selection clause and traditional forum non conveniens grounds. The court found that Sweden was a suitable alternative forum and that both private and public interest factors weighed in favor of Sweden as the forum. The plaintiffs appealed the decision, contesting both grounds of the ruling.The California Court of Appeal, Second Appellate District, reviewed the case and concluded that the trial court did not abuse its discretion in determining that private and public interest factors favored Sweden as the forum. The appellate court held that the trial court properly stayed the action on the alternative independent ground of traditional forum non conveniens. Additionally, the appellate court addressed the impact of the California Supreme Court's decision in EpicentRx, Inc. v. Superior Court on the plaintiffs' claim that the enforcement of the forum selection clause operated as an "implied waiver" of their jury trial right. The appellate court affirmed the trial court's order, finding that the enforcement of the forum selection clause did not violate California public policy regarding the right to a jury trial. View "Kiely v. Hyph (USA), Inc." on Justia Law

In the 1950s, Goodrich Corporation built a vinyl-manufacturing complex in Calvert City, Kentucky, and used unlined ponds for hazardous waste disposal. In 1988, the EPA declared the site a Superfund site. Goodrich sold the complex to Westlake Vinyls, Inc. in the 1990s, agreeing to cover future cleanup costs. In 2000, PolyOne Corporation (now Avient Corporation) assumed Goodrich’s responsibilities. Disputes arose over cleanup costs, leading to a 2007 settlement agreement that included arbitration provisions for future cost allocations.The United States District Court for the Western District of Kentucky previously reviewed the case. Avient had twice sought arbitration under the agreement, first in 2010 and again in 2017. In 2018, Avient challenged the arbitration provisions' validity, but the district court held that Avient had waived this argument by initiating arbitration. The court enforced the arbitration award, and Avient did not challenge this decision. In 2022, Westlake demanded arbitration, and Avient again claimed the arbitration provisions were invalid. The district court granted summary judgment to Westlake, holding that Avient’s challenge was waived and barred by res judicata and judicial estoppel.The United States Court of Appeals for the Sixth Circuit reviewed the case. The court affirmed the district court’s judgment but on different grounds. The court held that the settlement agreement’s provision for de novo judicial review of arbitration awards was invalid under the Federal Arbitration Act, as established in Hall Street Associates, L.L.C. v. Mattel, Inc. However, the court found that this invalid provision could be severed from the agreement without affecting the economic and legal substance of the transactions contemplated by the parties. Therefore, the arbitration provisions remained valid and enforceable. The court affirmed the district court’s judgment. View "Avient Corp. v. Westlake Vinyls, Inc." on Justia Law