Justia Contracts Opinion Summaries

This action arose out of a dispute between two companies involved in the development of pharmaceuticals. Plaintiff was a biodefense company engaged in the development and commercialization of medical countermeasures against biological and chemical weapons and defendant was also a biodefense company that concentrated on the discovery and development of oral antiviral and antibacterial drugs to treat, prevent, and complement vaccines for high-threat biowarfare agents. The court rejected plaintiff's claim that defendant breached a binding license agreement, but found that defendant did breach its obligations to negotiate in good faith and that defendant was liable to plaintiff under the doctrine of promissory estoppel. The court rejected defendant's claim that plaintiff breached its obligation to negotiate in good faith. The court denied plaintiff's claims for specific performance of a license agreement with the terms set forth in the time sheet or, alternatively, for a lump sum award of its expectation damages. The court concluded, however, that plaintiff was entitled to share in any profits relied on from the sale of the drug in question, after an adjustment for the upfront payments it likely would have had to make had the parties negotiated in good faith a license agreement in accordance with the terms of the term sheet. In addition, plaintiff was entitled to recover from defendant a portion of the attorneys' fees and expenses plaintiff incurred in pursuing the action.

This action arose from a transaction involving the sale of equity in a Texas-based dental practice management company to a Chicago-based private equity firm. At issue was whether the purchasers' ability to raise the forum selection clause issue in Texas provided them with an adequate remedy at law, undermining the basis for equity jurisdiction, and if not, whether the terms of the forum selection clause were broad enough to reach the Texas claims. The court held that the forum selection clause did not provide purchasers an adequate remedy at law, and therefore, the court had subject matter jurisdiction over their claims. The court also held that the forum selection clause here, which applied to any claims arising under or relating to the transaction, was sufficiently broad in scope that the purchasers were likely to succeed in showing that it provided exclusive jurisdiction in Delaware over the claims brought by the sellers in Texas. Accordingly, the court granted purchasers' motion for preliminary injunction.

In this action brought pursuant to 8 Del. C. 225, plaintiffs sought a determination that certain written consents validly removed defendant directors and replaced them with a new slate. Defendant directors contended that they could not be removed or a new slate elected without the consent of a majority of the Series B Preferred Stock. Applying enhanced scrutiny, the court held that defendant directors breached their fiduciary duties when issuing the Series B Preferred Stock where, although they honestly believed they were acting in the best interests of the company, they breached their duty of loyalty by structuring the stock issuance to prevent an insurgent group from waging a successful proxy contest. Therefore, the class provision could not be given effect and the written consents validly elected a new board.

This post-trial opinion determined the voting membership of GnB, LLC, a Delaware limited liability company. The parties disputed whether Firehouse Gallery, LLC, a Florida limited liability company, was a voting member of GnB. The parties also disputed whether GnB possessed an exclusive license to use the first-tier, generic domain name candles.com; held an option to purchase candles.com; and owned other assorted domain names relating to the candles business. The court held that Firehouse and plaintiff, who controlled GnB, each held a 50% voting membership interest; GnB owned the exclusive license and option to purchase candles.com and the other domain names; and plaintiff and defendant, the current principal of Firehouse, each breached their fiduciary duty of loyalty to GnB and must account for the profits and personal benefits they received. The court held that defendant was not otherwise liable to GnB or plaintiff. Because all of the litigants engaged in misconduct that could support fee-shifting, the doctrine of unclean hands applied with particular salience. Accordingly, the court held that all parties would bear their own fees and costs.

This litigation arose out of a contract between the parties in which PDNED agreed to transfer its rights to LHC to purchase shopping mall property from a third party. LHC alleged that, based on representations made by PDNED, LHC expected to lease the property to Lowe's Home Improvement. PDNED subsequently appealed a judgment entered on a jury verdict in favor of LHC. As a preliminary matter, the court held that it need not resolve the choice-of-law question where the parties agreed that, with a few exceptions, no material differences existed between New Hampshire and Texas law with regard to the case and the court's conclusions would be the same under either state's law. The court held that the purchase and sale agreement (P&S Agreement) precluded LHC's promissory estoppel claim because the agreement itself controlled the extent of PDNED's binding promises with regard to the purchase and sale of the property. The court also held that the district court did not err when it denied PDNED's motion to dismiss LHC's negligent and fraudulent misrepresentations claims as a matter of law where the evidence presented at trial was sufficient to support finding PDNED liable for negligent and fraudulent misrepresentations. The court also held that the jury's out-of-pocket award was the appropriate measure to compensate LHC for reliance costs but that lost profits were not an appropriate measure of damages for the fraudulent misrepresentations in this case. The court finally held that PDNED could not be considered the prevailing party in this litigation for purposes of the P&S Agreement's attorneys' fees provision. Accordingly, the court vacated the district court's judgment against PDNED on LHC's promissory estoppel claim and the jury's award in lost profits. The court affirmed the district court's judgment and the jury's award of out-of-pocket damages and the denial of PDNED's motion for attorney's fees.

DynaVision (X) sued Brenda Smith, Robert Thomas, and Bryan Ownbey, (Y) alleging that they breached a fiduciary duty to tell X that Shelby Peeples (Z) had financed the purchase of its interest and moreover, that Y's failure to disclose Z's involvement fraudulently induced X to sell its interest to Y. X also brought suit against Z, the case before the court, alleging that Z violated federal securities law, state securities law, and state common law by denying involvement in the transaction and causing X to sell its interest to Y. X lost both cases on summary judgment because Y's alleged misrepresentation about Z's involvement in the buy-out did not cause X to sell its interest. Rather, X sold because it was in X's economic self-interest to do so. X needed Y's skills; had X purchased Y's interest, it would have had no one to run the carpet factory or to market its product. X therefore had no economically viable option but to sell. After assessing the merits of X's claims, the court affirmed the judgment granting summary judgment.

Polysilicon producer MEMC entered in exclusive sales representation agreements with Semi-Materials. Under these agreements, Semi-Materials was to serve as the sales representative for MEMC in China and Korea. Semi-Materials brought suit against MEMC, claiming it was entitled to certain commissions. The court held that, considering the four corners of the agreements at issue, the court could not agree with the district court's conclusion that the agreements clearly and unambiguously limited Semi-Materials to receiving commissions only on those sales which included terms whereby the risk of loss remained with MEMC until the product entered China or South Korea. Because the meaning and intent of that language was uncertain and subject to more than one reasonable interpretation, it was necessary to reverse the grant of partial summary judgment and remand this matter to the district court for trial. The court also held that the evidence presented to the jury at trial supported its finding that MEMC clothed a sales manager with the authority to enter into the agreements with Semi-Materials. Accordingly, MEMC could not show there were no probative facts presented at trial supporting the jury's determination that Semi-Materials reasonably relied upon the sales manager's apparent authority to enter into the agreements. Moreover, the court rejected MEMC's argument that Semi-Materials failed to perform a material obligation to the contracts to provide regular reports to MEMC. Therefore, the court reversed the district court's grant of partial summary judgment for MEMC and affirmed its denial of MEMC's judgment as a matter of law.

Chevron, the franchisor, brought suit for declaratory judgment against one of its franchised dealers, M&M Petroleum Services, Inc. M&M responded with a counterclaim of its own, a counterclaim that was not only found to be frivolous, but the product of perjury and other misconduct. The court held that had M&M merely defended Chevron's suit, it could not have been held liable for attorneys' fees. The court held, however, that in affirmatively bringing a counterclaim that was reasonably found to be frivilous, M&M opened itself up to liability for attorneys' fees under the Petroleum Marketing Practices Act, 15 U.S.C. 2805(d)(3). Therefore, the district court did not err in determining that Chevron was eligible to recover attorneys' fees, nor did the district court abuse its discretion in determining that M&M's counterclaim was frivolous and awarding attorneys' fees to Chevron under section 2805(d)(3).

This case involved a fallout of a $3.65 billion Ponzi scheme perpetrated by Minnesota businessman Thomas J. Petters. Appellants, investment funds (collectively, Ritchie), incurred substantial losses as a result of participating in Petters' investment scheme. Ritchie subsequently sued two officers of Petters' companies, alleging that they assisted Petters in getting Ritchie to loan over $100 million to Petters' company. Ritchie's five-count complaint alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(a), (c)-(d), common law fraud, and tortious inference with the contract. The court held that the district court erred in concluding that Ritchie's action was barred by a Receivership Order. The court also rejected arguments challenging the sufficiency of Ritchie's pleadings in the common law fraud count and did not to address other arguments related to abstention, lack of causation, and absolute privilege. Accordingly, the court reversed the judgment of the district court and remanded for further proceedings.

This matter involved the interpretation of a limited liability company operating agreement. Petitioner (Showell) was a member of an accounting firm (Hoyt) and respondents (Pusey and Hatter) were the remaining members of the LLC at the time. In early 2007, Showell "retired" from Hoyt. Showell subsequently asked the court to construe the provisions of the Hoyt Operating Agreement to determine what value, if any, Showell was due for his interest in Hoyt as a consequence of his departure from the company. The court held that Showell was entitled to receive his share of the liquidation value of Hoyt as of the date of his "retirement" from the company.