Justia Contracts Opinion Summaries

In this construction contract dispute, the Supreme Court held that the San Antonio River Authority possessed the authority to agree to arbitrate claims under Texas Local Government Code Chapter 271 and exercised that authority in the contract and that the judiciary, rather than an arbitrator, retains the duty to decide whether a local government has waived its governmental immunity.The River Authority hired Austin Bridge and Road L.P. for a construction project. The parties agreed to submit any disputes about the contract to arbitration. Austin Bridge invoked the contract's arbitration provisions when disagreements about the scope of work and payment arose. After the arbitrator denied the River Authority's plea of governmental immunity, the River Authority sued Austin Bridge, arguing that it lacked the authority to agree to the contract's arbitration provisions. The trial court concluded that the arbitration provisions in the contract were enforceable. The court of appeals agreed that the River Authority had the authority to agree to arbitrate but concluded that a court, rather than an arbitrator, must decide whether the River Authority was immune from the claims against it. The Supreme Court affirmed, holding that chapter 271 waived the River Authority's immunity from suit for Austin Bridge's breach of contract claim. View "San Antonio River Authority v. Austin Bridge & Road, L.P." on Justia Law

North Edwards Water District (the District) selected Clark Bros., Inc. (Clark) as its general or direct contractor on a public works project to build an arsenic removal water treatment plant. Clark hired subcontractor Crosno Construction (Crosno) to build and coat two steel reservoir tanks. The subcontract contained a "pay-when-paid" provision that stated Clark would pay Crosno within a reasonable time of receiving payments from the District, but that this reasonable time "in no event shall be less than the time Contractor and Subcontractor require to pursue to conclusion their legal remedies against Owner or other responsible party to obtain payment . . . ." After Crosno completed most of its work, a dispute arose between the District and Clark halting the project. As Clark sued the District, Crosno sought to recover payments owed under the public works payment bond that Clark had obtained for the project. The issue this case presented for the Court of Appeal's review involved Crosno's claim against the bond surety, Travelers Casualty and Surety Company of America (Travelers). At issue was whether the pay-when-paid provision in Crosno's subcontract precluded Crosno from recovering under the payment bond while Clark's lawsuit against the District was pending. Relying on Wm. R. Clarke Corp. v. Safeco Ins. Co., 15 Cal.4th 882 (1997), the trial court found the pay-when-paid provision here unenforceable because it affected or impaired Crosno's payment bond rights in violation of Civil Code section 8122. With the facts largely undisputed, the court granted Crosno's motion for summary judgment and entered judgment in its favor for principal due plus prejudgment interest. Travelers argued the trial court misconstrued Wm. R. Clarke and erred in failing to enforce the pay-when-paid provision against the bond claim. After carefully considering the parties' arguments, the Court of Appeal agreed with the trial court's analysis and affirmed. View "Crosno Construction, Inc. v. Travelers Casualty etc." on Justia Law

Restore was asked to mitigate and repair significant fire damage at Proviso East High School, having provided similar service to the District in the past. The District’s customary practice when contracting for repair and payment of losses covered by insurance was to proceed without a recorded vote of its Board. The fire loss was covered by insurance. The District’s superintendent executed contracts with Restore.The District was subject to the School District Financial Oversight Panel (FOP) and Emergency Financial Assistance Law (105 ILCS 5/1B-1) and the Financial Oversight Panel Law (105 ILCS 5/1H-1). The FOP’s chief fiscal officer attended construction meetings and approved numerous subcontracts, quotations, bids, sales orders, change orders, and invoices. Although there was no recorded vote, “a majority of the Proviso Board knew and informally approved" the work. Restore was paid by the insurers for all but $1,428,000. Restore sued, seeking recovery from the District based on quantum meruit. The District argued that it had no obligation to pay because the contracts had not been let out for bid and approved by a majority vote as required by the School Code (105 ILCS 5/1-1).The Illinois Supreme Court affirmed the reinstatement of the case following dismissal. The failure of a governmental unit to comply with required contracting methods is not fatal to a plaintiff’s right to recover based on quasi-contract or implied contract principles. The Board was subject to the FOP; the FOP was fully apprised of and approved the work. Any misconduct was on the part of the Board; allowing Restore to recover presents no “risk of a raid on the public treasury.” View "Restore Construction Co., Inc. v. Board of Education of Proviso Township High Schools District 209" on Justia Law

Lakeview Excavating appealed a district court judgment dismissing its complaint against Dickey County and German Township (Defendants) for breach of contract, intentional fraud, and misrepresentation. In spring 2012, the Defendants awarded to Lakeview three road construction project contracts funded by the Federal Emergency Management Agency (FEMA). The parties executed three identical contracts, one for each project. The contracts required Lakeview to provide the necessary documents to satisfy FEMA requirements for funding. Lakeview had to use more material than was listed in the bid documents to complete the projects. Some of the material used by Lakeview was taken from private property without permission and resulted in litigation against Lakeview. Lakeview completed the road construction projects in August 2012. In October 2016, Lakeview sued the Defendants for breach of contract, fraud, misrepresentation, and unlawful interference with business. The court ruled Lakeview breached its contracts with the Defendants, and held Lakeview’s tort claims against the Defendants were barred by the statute of limitations. Lakeview appealed, but finding no reversible error, the North Dakota Supreme Court affirmed. View "Lakeview Excavating, Inc. v. Dickey County, et al." on Justia Law

After Mount Diablo School District hired Taber to modernize eight school campuses, the plaintiffs challenged the District’s use of a lease-leaseback agreement for the construction project. The court of appeal affirmed the dismissal of most of plaintiff’s claims, except a claim against Taber of conflict of interest. Plaintiff alleged Taber provided preconstruction services regarding the project, so a conflict of interest arose when the District subsequently awarded Taber the contract. The court of appeal affirmed summary judgment in Taber’s favor, finding no violation of Government Code section 1090(a). Section 1090 only prohibits a contract made by a financially-interested party when that party makes the contract in an “official capacity.” Where the financially-interested party is an independent contractor, section 1090 applies only if the independent contractor can be said to have been entrusted with “transact[ing] on behalf of the Government.” In this case, it cannot reasonably be said that Taber was hired to engage in or advise on public contracting on behalf of the District. The District contracted with Taber for Taber to provide preconstruction services in anticipation of Taber completing the project. Taber provided those services (planning and setting specifications) in its capacity as the intended provider of services, not as a de facto official of the District. View "California Taxpayers Action Network v. Taber Construction, Inc." on Justia Law

In 1980, Langkamp, then a toddler, suffered severe burn injuries on U.S. Army property. In a suit under the Federal Tort Claims Act, the parties entered into a Settlement Agreement. The government agreed to pay $239,425.45 upfront to cover attorney fees and costs, plus a structured settlement: $350.00 per month, 1985-1996; $3,100.00 per month, guaranteed for 15 years, beginning in 1996, and Lump Sum Payments of $15,000.00 in 1996, $50,000.00 in 2000, $100,000.00 in 2008, 250,000.00 in 2018, and $1,000,000.00 in 2028. The government issued a check for $239,425.45 to the parents and a check for $160,574.55 payable to JMW Settlements, an annuity broker. JMW purchased two single-premium annuity policies from ELNY to fund the monthly and periodic lump-sum payments. Until 2013, ELNY sent Langkamp the specified monthly and periodic lump-sum payments. Following ELNY’s insolvency and court-approved restructuring, Langkamp’s structured settlement payments were reduced to 40 percent of the original amount. The Claims Court rejected Langkamp’s argument that the government had continuing liability for the Settlement Agreement payments. The Federal Circuit reversed. The Settlement Agreement contains no reference to the purchase of an annuity from a third party but unambiguously obligates the government to ensure that all future monthly and periodic lump-sum payments are properly disbursed. The court noted that in 1984 it cost the government approximately $160,000 to obtain a promise from an insurance company to fund the future payments specified in the Settlement Agreement. View "Langkamp v. United States" on Justia Law

Ron Koenig was the superintendent and principal of the Warner Unified School District (the district). He and the district entered an agreement to terminate his employment one year before his employment agreement was due to expire. Under the termination agreement, Koenig agreed to release any potential claims against the district in exchange for a lump sum payment equivalent to the amount due during the balance of the term of his employment agreement, consistent with Government Code section 53260. The district also agreed to continue to pay health benefits for Koenig and his spouse "until Koenig reaches age 65 or until Medicare or similar government provided insurance coverage takes effect, whichever occurs first." The district stopped paying Koenig's health benefits 22 months later. Koenig then sued to rescind the termination agreement and sought declaratory relief he was entitled to continued benefits pursuant to his underlying employment agreement, which provided that Koenig and his spouse would continue receiving health benefits, even after the term of the agreement expired. After a bench trial, the trial court determined the district's promise in the termination agreement to pay health benefits until Koenig turned 65 violated section 53261, was unenforceable, and rendered the termination agreement void for lack of consideration. Both Koenig and the district appealed the judgment entered after trial. Koenig contended the trial court properly determined the termination agreement was void but should have concluded he was entitled to continued health benefits until the age of 65. The district contended the trial court erred when it concluded the termination agreement was void; rather, the trial court should have severed the termination agreement's unenforceable promise to continue paying benefits, enforced the remainder of the termination agreement, and required Koenig to pay restitution for benefits paid beyond the term of the original agreement. The Court of Appeal concluded the termination agreement's unlawful promise to pay health benefits in excess of the statutory maximum should have been severed to comply with sections 53260 and 53261, Koenig did not establish he was entitled to rescind the termination agreement, and the district was entitled to restitution for health benefits paid beyond the statutory maximum. Judgment was reversed and the trial court directed to enter judgment in favor of the district for $16,607. View "Koenig v. Warner Unified School District" on Justia Law

In 1983-1984, the Farmers Home Administration issued apartment owners (Appellants) 50-year loans to provide low-income housing under 42 U.S.C. 1485. A promissory note provided that prepayments “may be made at any time at the option of the Borrower.” The mortgage stated that the loan must be used in compliance with the statute and that Appellants must use the property for low-income housing for 20 years before they could prepay and exit the program. The documents were contemporaneously executed and cited each other. The Emergency Low Income Housing Preservation Act of 1987 and Housing and Community Development Act of 1992 provided that borrowers could no longer prepay after the 20-year period but must notify FmHA’s successor, which was to make “reasonable efforts" to extend the low-income use,” 42 U.S.C. 1472(c)(4)(A). If the agreement is not extended, the borrower must attempt to sell the property at fair market value to a nonprofit organization or a public agency. Appellants rejected incentive offers and, in 2009-2010, unsuccessfully marketed their properties for the required period. Facing foreclosure and low occupancy due to high unemployment, Appellants submitted deeds in lieu of foreclosure, then filed suit. The Federal Circuit reinstated certain claims. In transferring deeds to the government, Appellants did not assign away their accrued claims for breach of the prepayment right. The Claims Court properly dismissed a contract-based Fifth Amendment “takings” claim. In entering contracts, the government acts in its commercial capacity and remedies arise from the contracts themselves, rather than from constitutional protections. Appellants can succeed under a theory premised on their property interests in the land and buildings before entering the contracts. View "Callaway Manor Apartments v. United States" on Justia Law

S. Mark Booth petitioned the Alabama Supreme Court for a writ of mandamus directing the the trial court to dismiss an action filed against him by the City of Guin. In 2008, Booth and the City entered into a contract entitled "Commercial Development Agreement." The agreement provided that the City would sell Booth approximately 40 acres of real property located in Marion County at a price of $5,000 per acre. Booth, in turn, promised to subdivide the property into lots for commercial development. The agreement included a provision granting the City the right to repurchase the property should Booth fail to develop the land within three years following the execution of the agreement. In 2017, the City sued Booth, asserting a claim for specific performance pursuant to the agreement's repurchase option. The City alleged Booth failed to construct at least one commercial facility on the property within three years from the effective date of the agreement. The City alleged that it had "timely tendered the purchase price to [Booth] and requested a conveyance of the real property described in the contract but [that Booth] refused to accept the tender or to make the conveyance." Booth moved to dismiss, arguing that, although he had fulfilled his obligations under the agreement by developing a hotel on the property, the City's complaint seeking to specifically enforce the repurchase of the property pursuant to its option to repurchase in Section 4.4(b) of the agreement was time-barred by the two-year statutory limitations period for such options in 35-4-76(a), Ala. Code 1975. After review, the Supreme Court granted Booth's petition as to the City's claims for specific performance, and its claims alleging fraud and breach of contact; the trial court was ordered to dismiss those claims. The Court denied Booth's petition relating to the City's rescission claim. View "Ex parte S. Mark Booth." on Justia Law

Section 515 of the Housing Act of 1949, 42 U.S.C. 1485, authorizes the Department of Agriculture, Farmers Home Administration to loan money to nonprofit entities to provide rental housing for elderly and low- and moderate-income individuals and families. Sonoma, a limited partnership contracted with the government to construct low-income housing in exchange for a $1,261,080 Section 515 loan. In 2010, Sonoma submitted a written request to prepay the balance of its loan. The government denied the request. Sonoma sued for breach of contract, including a claim for a “tax neutralization payment” to offset the negative tax consequences of a lumpsum damages award. The Claims Court awarded Sonoma expectancy damages of $4,223,328 and a tax gross-up award of $3,171,990. The Federal Circuit vacated. The Claims Court clearly erred in using the income from a single tax year to predict the future rates at which each partner would pay taxes. While the government’s breach created the circumstances that require consideration of future income and tax rates, Sonoma is not absolved of its burden of showing an income-tax disparity and justifying any adjustment. View "Sonoma Apartment Associates v. United States" on Justia Law