Justia Contracts Opinion Summaries

USAA Casualty Insurance Company (“USAA”) sought a declaratory judgment that it was not obligated to defend, indemnify, or provide insurance coverage for claims made in two lawsuits against Trinity Carr, the daughter of a USAA homeowner’s-insurance policyholder. The plaintiffs in the underlying lawsuits sought money damages from Carr and others for personal injuries and wrongful death suffered by Amy Joyner-Francis in a physical altercation - described in both complaints as a “brutal, senseless, forseeable [sic] and preventable attack” - between Joyner-Francis and Carr and her friends. USAA argued at trial, as it did before the Delaware Supreme Court, that the incident - whether it be labeled an altercation, an attack, or otherwise - was not an “accident” and therefore not a covered occurrence under the policy and that, even if it were, the purported liability was excluded from coverage. The Superior Court disagreed and entered summary judgment in favor of Carr. The Delaware Supreme Court agreed with USAA’s interpretation of the relevant policy provisions and therefore reversed the Superior Court’s judgment. "To label an intentional assault, as the parties agree occurred here, an accident is to disregard the ordinary, everyday meaning of 'accident.' We thus hold that whether an assault is an 'accident' is determined by the intent of the insured, and not by the viewpoint of the victim. ... even though Carr may not have intended to cause [the victim's] death, she certainly intended to cause injury to her." View "USAA Casualty Ins. Co. v. Carr" on Justia Law

When Erik Knight sold KnighTek, LLC to Jive Communications, Inc., Jive allegedly agreed to pay Knight $100,000 upfront and a revenue-based payment stream capped at $4.6 million. The continuing payments would convert to a lump sum payment if Jive’s ownership changed. Years later, Jive offered to cash out KnighTek for $1.75 million, a substantial discount from the remaining cap amount. According to Knight, Jive’s representatives told him the buy-out money depended on KnighTek accepting the proposal right away. If it did not, Jive would use the funds for other buyouts. Jive’s representatives also told Knight if he turned down the offer, it would take five years for Jive to make the remaining payments. Two days after KnighTek agreed to accept $1.75 million, Jive announced publicly it was being acquired by LogMeIn for $342 million - a change of control that according to KnighTek would have netted it a $2.7 million immediate payment under their earlier agreement. Believing it had been misled and shorted about $1 million, KnighTek filed suit against Jive, alleging that Jive fraudulently induced KnighTek to take the discounted payout. According to KnighTek, Jive and its representatives knew about the imminent change of control, misrepresented the availability of buyout funds, and duped KnighTek into accepting a discount when KnighTek could have received almost $1 million more and an immediate payment after the LogMeIn transaction. A Delaware superior court dismissed the complaint, finding some of Jive’s alleged misrepresentations lacked particularity and others failed to state a claim under Utah law, the law governing their agreements. The Delaware Supreme Court disagreed, finding that, viewing the complaint in the light most favorable to KnighTek, accepting as true its well-pleaded allegations, and drawing all reasonable inferences that logically flow from those allegations, KnighTek alleged fraud with sufficient particularity and stated a claim for fraudulent misrepresentation under Utah law. Thus the Court reversed the lower court’s dismissal, and remanded for further proceedings. View "Knightek, LLC v. Jive Communications, Inc." on Justia Law

Plaintiff-appellant Germaninvestments Aktiengesellschaft (AG) (“Germaninvestments”) was a Swiss holding company formed to manage assets for the Herrling family. Defendant Allomet Corporation (“Allomet”) was a Delaware corporation that manufactured high-performance, tough-coated metal powders using a proprietary technology for coating industrial products. Defendant Yanchep LLC (“Yanchep”), was also a Delaware limited liability company with Mirta Hereth as its sole member (together, Allomet and Yanchep are referred to as “Appellees”). Allomet struggled with declining performance as early as 2002. In mid-2016, Tanja Hausfelder, an insurance professional who apparently knew or worked with the Herrlings and Hereth, advised Herrling that Hereth was looking for a joint venture partner to join Allomet. After a meeting in Switzerland, Herrling and Hereth discussed a general structure for their joint venture to raise capital for Allomet. The issue this case presented for the Delaware Supreme Court’s review centered on whether the Court of Chancery correctly determined that a provision in a Restructuring and Loan Agreement between the parties was a mandatory, as opposed to a permissive, forum selection clause. The Court of Chancery held that Austrian law governed the analysis of the forum selection provision, and determined that the provision is governed by Article 25 of the European Regulation on Jurisdiction and Recognition and Enforcement of Judgments in Civil and Commercial Matters. Based upon these conclusions, the court granted Defendants’ motion to dismiss in favor of the Austrian forum. The Delaware Supreme Court held that Appellees, who raised Austrian law as a basis for their motion to dismiss, had the burden of establishing the substance of Austrian law, and that the Court of Chancery erred in determining that Appellees had carried that burden. Accordingly, the forum selection provision analysis should have proceeded exclusively under Delaware law. Applying Delaware law, the Delaware Court determined the forum selection provision was permissive, not mandatory. “As such, the forum selection provision is no bar to the litigation proceeding in Delaware.” The Court affirmed the Court of Chancery’s holding that 8 Del. C. section 168 was not the proper mechanism for the relief Appellants sought. Therefore, this matter was affirmed in part, reversed in part, and remanded to the Court of Chancery for further proceedings. View "Germaninvestments AG v. Allomet Corporation" on Justia Law

Parke Bancorp (“Parke”) made a loan to 659 Chestnut LLC (“659 Chestnut”) in 2016 to finance the construction of an office building in Newark, Delaware. 659 Chestnut pleaded a claim in the Superior Court for money damages in the amount of a 1% prepayment penalty it had paid under protest when it paid off the loan. The basis of 659 Chestnut’s claim was that the parties were mutually mistaken as to the prepayment penalty provisions of the relevant loan documents. Parke counterclaimed for money damages in the amount of a 5% prepayment penalty, which it claimed was provided for in the agreement. After a bench trial, the Superior Court agreed with 659 Chestnut and entered judgment in its favor. After review, the Delaware Supreme Court reversed and directed entry of judgment in Parke’s favor on 659 Chestnut’s claim. Although Parke loan officer Timothy Cole negotiated on behalf of Parke and represented to 659 Chestnut during negotiations that there was a no-penalty window, the parties stipulated that: (1) everyone knew that Cole did not have authority to bind Parke to loan terms; and (2) everyone also knew that any terms proposed by Cole required both final documentation and approval by Parke’s loan committee. It was evident to the Supreme Court that 659 Chestnut did not offer clear and convincing evidence that Parke’s loan committee agreed to something other than the terms in the final loan documents. Accordingly, it Directed entry of judgment for Parke. View "Parke Bancorp Inc., et al. v. 659 Chestnut LLC" on Justia Law

CompoSecure, L.L.C., a manufacturer of metal credit cards, sought to invalidate the Sales Representative Agreement (the “Sales Agreement”) it signed with CardUX, LLC. The Delaware Court of Chancery held in a February 2018 post-trial decision that the Sales Agreement had not been properly approved under CompoSecure’s Amended and Restated Limited Liability Company Agreement, but that CompoSecure had impliedly ratified the Sales Agreement by its conduct. CompoSecure appealed. In a November 2018 opinion, the Delaware Supreme Court agreed with the trial court’s analysis as far as it went, but remanded to the trial court to answer a potentially outcome-determinative question that it had not answered: whether the Sales Agreement was a “Restricted Activity” under the LLC Agreement. If it was a Restricted Activity, the Supreme Court noted that the Sales Agreement would have been void and unenforceable. In its report on remand, the Court of Chancery held that the Sales Agreement was not a Restricted Activity, and thus, the Sales Agreement was not void. The Supreme Court agreed with the Court of Chancery’s conclusions, and affirmed. View "Composecure, L.L.C. v. Cardux, LLC f/k/a Affluent Card, LLC" on Justia Law

Robert Nederlander, Sr. (“Robert”) controlled Nederlander of San Francisco Associates (“Nederlander”), a California general partnership. Carole Shorenstein Hays (“Carole”) and her family controlled CSH Theatres L.L.C. (“CSH”), a Delaware LLC. Nederlander and CSH each owned a fifty-percent membership interest in Shorenstein Hays-Nederlander Theatres LLC (“SHN”), a Delaware LLC that operated theaters in San Francisco under SHN’s Plan of Conversion and Operating Agreement of the Company (the “LLC Agreement”). In 2010, CSH Curran LLC, an entity that Carole co-managed, purchased the Curran Theatre in San Francisco (the “Curran”). SHN had been operating under a lease from the Curran’s then-owners, the Lurie Company, since the beginning of the partnership. Carole and her husband, Dr. Jeffrey Hays (“Jeff”) (collectively, the “Hayses”), did not extend that lease with SHN when it expired in 2014. Thereafter, the Hayses began staging productions at the Curran. In February 2014, CSH sued Nederlander in the Delaware Court of Chancery for a declaratory judgment that it had no legal obligation to renew the Curran lease. In September 2018, Nederlander sought a preliminary injunction against CSH and the Hayes to prevent them from staging two theatrical productions at the Curran (the “PI Action”). In the PI Action, Nederlander asserted four counts, but focused its injunction efforts on Count I, which asserted breach of contract claims (based upon the “provisions of Section 7.02 of the LLC Agreement or the contractual fiduciary duties owed to SHN and its members under the LLC Agreement) against all defendants in that action. The trial court denied that motion and shortly thereafter entered a partial final judgment as to Count I of Nederlander’s Complaint, pursuant to Court of Chancery Rule 54(b), to allow for an immediate appeal of the PI Decision. Nederlander argued on appeal that the trial court erred in the Declaratory Judgment Action by refusing to enforce Section 7.02(a) of the LLC Agreement against the Hayses. The Delaware Supreme Court agreed with Nederlander that the Court of Chancery misinterpreted Section 7.02(a) and that the Hayses could not stage competitive productions (not falling within Section 7.02(b)’s exceptions) at the Curran that violated its contractual duty to maximize SHN’s economic success. Accordingly, the Court reversed that aspect of the trial court’s decision. Because Nederlander did not challenge the court’s rulings in the Declaratory Judgment Action as to damages and other forms of relief, the Supreme Court declined to remand that action. Further, in view of the reversal of the trial court’s interpretation of Section 7.02(a) in the Declaratory Judgment Action, the Supreme Court ordered remand of the PI Action for further proceedings. The Court found no error with any other aspect of the trial court’s decisions. View "In Re: Shorenstein Hays-Nederlander Theatres LLC Appeals" on Justia Law

In 2008, Invenergy Wind LLC, a wind energy developer, was raising money for a Series B investment round, and Leaf Clean Energy Company (“Leaf Parent”), an investment fund, expressed interest. After extensive negotiations, Leaf Parent invested $30 million in Invenergy Series B notes through a vehicle called Leaf Invenergy Company (“Leaf”). The agreement governing the Series B notes gave noteholders such as Leaf the right to convert to equity and incorporated an LLC agreement that the noteholders and Invenergy would execute upon conversion. The Series B Note Agreement and the Series B LLCA also included provisions that prohibited Invenergy from conducting a “Material Partial Sale” without Leaf’s consent unless Invenergy paid Leaf a premium called a “Target Multiple.” Although the parties renegotiated several aspects of their agreements with one another over the next few years, the consent provisions persisted in substantially similar form into a Third Amended and Restated LLC Agreement, which was the operative agreement in this dispute. Leaf filed suit after Invenergy closed a $1.8 billion asset sale - a transaction that Invenergy conceded was a Material Partial Sale - without first obtaining Leaf’s consent or redeeming Leaf’s interest for the Target Multiple. After a trial, the Court of Chancery concluded that, although Invenergy had breached the Material Partial Sale consent provisions, Leaf was not entitled to the Target Multiple. The court then awarded only nominal damages because, according to the court, Invenergy had engaged in an “efficient breach.” The Court of Chancery directed the parties to complete a buyout of Leaf’s interests pursuant to another LLC Agreement provision that Invenergy had invoked after Leaf had filed suit. The Delaware Supreme Court disagreed with the Court of Chancery’s interpretation of the consent provision and its award of nominal damages and therefore reversed. Because Invenergy conducted a Material Partial Sale without Leaf’s consent and without paying Leaf the Target Multiple, Leaf was entitled to the Target Multiple as contractual damages. The Court awarded Leaf the Target Multiple in damages on condition that it surrenderd its membership interests in Invenergy. View "Leaf Invenergy Co. v. Invenergy Renewables LLC" on Justia Law

In early 2013, CITGO Petroleum Corp. Sunline Commercial Carriers, Inc., to ship its product through a Master Agreement, which was to be implemented by another agreement, a Term Agreement. The Master was set to expire on December 31, 2014, but could be terminated by either party on 60 days’ notice. The Term “remain[ed] in effect until the Master Agreement is expired or terminated” but also contained another sentence stating that it was a “1 Year agreement with a start date of April 1, 2013.” The Term required that CITGO ship a monthly minimum to Sunline, or compensate Sunline for failing to do so. Not long into their relationship, CITGO breached the agreement by failing to ship the monthly minimum, creating a “shortfall.” After breaching, CITGO used its leverage to obtain concessions that allowed it to make up the shortfall at the end of the parties’ contractual relationship. On March 31, 2014, CITGO sent Sunline a termination notice. Over the next two months, all of the Term Agreement’s specific provisions seemed to govern the parties’ relationship. During this time, CITGO shipped enough product to Sunline to meet its previously accrued shortfalls. But if the Term Agreement’s minimum monthly requirement remained in place, CITGO failed meet the minimum and generated additional shortfalls. At the end of May, CITGO stopped using Sunline to ship oil. Sunline sued and eventually moved for summary judgment, arguing that the Term Agreement remained in effect until May 31, 2014; CITGO was therefore still liable for the shortfalls generated before the termination notice; and CITGO generated shortfalls in April and May. In response, CITGO argued that the Term Agreement ended on March 31, 2014, the day CITGO sent its termination notice; that only the Master Agreement continued through May 31, 2014; and as a result, CITGO had no obligation to meet the Term Agreement’s minimum barrel requirements. The Superior Court held, as a matter of law, that the Term Agreement ended on March 31, 2014. Sunline appealed, arguing that the Superior Court’s contractual interpretation was inconsistent with the Term Agreement’s text, and that, in the alternative, the Term Agreement was ambiguous and parol evidence had to be considered. The Delaware Supreme Court reversed, finding the Term Agreement was meant to continue in force as long as the Master Agreement did. The Term Agreement contained conceivably conflicting terms, which could not be indisputably reconciled on the face of the contract, and was therefore ambiguous. The Court also reversed the Superior Court holding the oil shipped in April and May satisfied CITGO’s shortfall liability. The Superior Court failed to consider parol evidence because of its earlier finding that the Term Agreement expired, as a matter of law, on March 31, 2014. The parol evidence made summary judgment inappropriate as it supported the reasonableness of Sunline’s interpretation. View "Sunline Commercial Carriers, Inc. v. Citgo Petroleum Corporation" on Justia Law

This appeal concerned a dispute over which party to a failed commercial real estate sale is entitled to the buyer’s deposit. The seller, 913 Market, LLC, claims that it was entitled to the deposit because the buyer failed to close the deal on the agreed date, and brought this action against the buyer claiming breach of contract and seeking a declaratory judgment regarding its rights under the purchase agreement. The buyer, Kamal Bathla, made two reasons why the deposit is rightfully his: (1) 913 Market could not convey title free and clear of all liens and encumbrances, as required by the purchase agreement, due to potential claims by a previous potential buyer of the building that had also failed to close; and (2) one of the conditions precedent was not satisfied because the title insurance commitment he received contained an exception, relating to litigation risk from the previous potential buyer, that did not exist in 913 Market’s existing title insurance policy. In either case, Bathla maintained, he was relieved of any obligation to close, and therefore had a right to get his money back. The Superior Court granted summary judgment for 913 Market. In rejecting Bathla’s first argument, the court reasoned that potential claims by the previous failed buyer did not cloud title because the previous buyer “had not perfected (nor did it seek to perfect) a lis pendens claim.” In rejecting Bathla’s second argument, the court read the purchase agreement as establishing a test based not on “what exceptions the Purchaser’s title insurance carrier might insist upon,” but rather on “whether Seller was able to convey satisfactory title, which it did.” The Delaware Supreme Court affirmed the Superior Court’s decision. "Contrary to Bathla’s exhortations, the mere possibility that a previous potential buyer who failed to close might later claim an interest in the building does not constitute a lien or encumbrance under the purchase agreement, and the condition precedent identified by Bathla does not require that he obtain a title commitment with exceptions that mirror those of 913 Market’s existing policy. And ultimately, the basic premise of Bathla’s case - that there was a genuine risk that the previous potential buyer would sue Bathla over the property - is implausible and does not provide a basis under the contract to avoid the obligation to close." View "Bathla v. 913 Market, LLC" on Justia Law

Appellant CompoSecure, LLC. appealed a nearly $17 million Chancery Court judgment for past-due commissions, legal fees and expenses, pre-judgment interest, and contract damages arising out of a sales agreement with Appellee CardUX, LLC. On appeal, CompoSecure argued the Court of Chancery erred by holding: (1) the Sales Agreement was voidable, not void, under CompoSecure’s Amended and Restated Limited Liability Company Agreement; and (2) CompoSecure impliedly ratified the Sales Agreement. CardUX argued that, even if CompoSecure were correct, the Delaware Supreme Court should enforce the Sales Agreement based on a provision in the LLC Agreement that addresses reliance by third parties on certain company actions, or based upon quantum meruit. After review, the Supreme Court determined the trial court needed to determine whether the Sales Agreement was a “Restricted Activity” as that term was defined by the parties’ contract. The Supreme Court agreed with the Court of Chancery’s conclusions that: (1) the Related Party Provision (leaving aside the Restricted Activities Provision) rendered the Sales Agreement voidable, not void, and was therefore subject to equitable defenses; (2) the parties impliedly ratified the Sales Agreement under New Jersey law; and (3) the Third Party Reliance Provision did not save the Sales Agreement from a failure to comply with the Related Party or Restricted Activities Provisions. Accordingly, the Supreme Court affirmed in part, reversed in part and remanded for further proceedings. View "Composecure, L.L.C. v. Cardux, LLC, et al." on Justia Law