Justia Contracts Opinion Summaries

In April 2008, plaintiff American Asphalt sued CMX for professional negligence and breach of implied warranty. On October 1, 2008, the superior court issued an order informing plaintiff that if it did not file a motion to set as required by Ariz. R. Civ. P. 38.1(e), the case would be placed on the inactive calendar after January 20, 2009 and dismissed without further notice after March 23, 2009. American did not file a motion to set and the case was dismissed without further notice on April 29, 2009. Plaintiff moved to set aside the dismissal, contending that its failure to comply with Rule 38.1(a) was excusable because it had substituted counsel around the time of the Rule 38.1(d) filing deadline. The superior court denied the motion. The court of appeals affirmed, finding no excusable neglect partly because the court's order provided notice as required by the rule. On review, the Supreme Court vacated the court of appeals' decision and remanded, holding that a notice issued several months prior to placing the case on the inactive calendar does not comply with the rule because the rule requires contemporaneous notice when a case is placed on the inactive calendar.

This case involved the construction and application of a combined professional and general liability insurance policy issued by appellant to appellee where appellee requested a defense from appellant under the policy for a civil lawsuit. In that underlying suit, plaintiff alleged that while her mother was terminally ill, she consented to appellee's harvesting of some of her mother's organs and tissues after her mother's death and consented to the harvesting because appellee was a non-profit corporation. Appellee, instead, transferred the tissues to a for-profit company, which sold the tissues to hospitals at a profit. Appellee subsequently sought coverage under its general liability insurance with appellant and appellant denied coverage because the conduct alleged was outside the scope of the insurance policy's coverage. The court certified the following questions to the Supreme Court of Texas: (1) "Does the insurance policy provision for coverage of 'personal injury,' defined therein as 'bodily injury, sickness, or disease including death resulting therefrom sustained by any person,' include coverage for mental anguish, unrelated to physical damage to or disease of the plaintiff's body?" (2) "Does the insurance policy provision for coverage of 'property damage,' defined therein as 'physical injury to or destruction of tangible property, including consequential loss of use thereof, or loss of use of tangible property which has not been physically injured or destroyed,' include coverage for the underlying plaintiff's loss of use of her deceased mother's tissues, organs, bones, and body parts?"

The Federal District Court for the Northern District of Alabama certified a question to the State Supreme Court. The Court was asked whether the failure of an insured to give notice of a proposed settlement to an insurance company causes the insured to forfeit underinsured motorist coverage (UIM), regardless of the insuredâs actual knowledge of that coverage, and regardless of prejudice to the insurance company if the insured has a copy of the policy that contains the coverage. In 2007, Delbert and Lou Ann Downey were stopped at an intersection on their motorcycle when a vehicle driven by Wyndell Thompson failed to stop and hit them. At the time of the accident, multiple insurance policies were in force. The Downeys had underinsured motorist coverage. The Downeys, in consideration of $10,000 and while represented by counsel (but without having notified Travelers Property Casualty Insurance Company that they were doing so), executed a general release to discharge Mr. Thompson and his insurance company from all liability arising out of the accident. Subsequently, and with different counsel, the Downeys notified Travelers of the accident for the first time and that they were making a claim under their underinsured motorist policy. Travelers denied the claim and the Downeys sued. The Supreme Court found that the Downeys were at all relevant times in possession of the policy, and it clearly provided UIM coverage. However, the Downeys did not meet the threshold of showing any condition under which their lack of notice could be excused. "In other words, the Downeys have âforfeit[ed]â UIM coverage."

In this case the Kentucky Supreme Court considered whether to adopt the "economic loss rule," which prevents the commercial purchaser of a product from suing in tort to recover for the economic losses arising from the malfunction of the product itself. The case involved a claim to insurers for a damaged piece of machinery. The insurers sued the manufacturers to recover the amount paid, claiming several causes of action including negligence, strict liability, and negligent misrepresentation. The trial court held the economic loss rule barred the tort claims. The court of appeals affirmed the trial court's adoption and application of the rule. The Supreme Court affirmed the judgment of the trial court, holding (1) the economic loss rule applies to claims arising from a defective product sold in a commercial transaction, and that the relevant product is the entire item bargained for by the parties and placed in the stream of commerce by the manufacturer; and (2) the economic loss rule applies regardless of whether the product fails over a period of time or destroys itself in a calamitous event, and the rule's application is not limited to negligence and strict liability claims but also encompasses negligent misrepresentation claims.

Plaintiff Branded Trailer Sales, Inc. (Branded) appealed a circuit court judgment that dismissed its case against Universal Truckload Services for lack of personal jurisdiction. A customer contacted Branded about having some flatbed trailers designed and manufactured. Branded contacted Universal for a recommendation for companies that could do the work. Universal recommended Liddell Trailers, LLC to design and manufacture the trailers. Branded entered into a contract with Liddell. The contract provided that Universal would buy several of the specially-designed trailers from Branded. Liddell later contacted Branded that the price for each trailer would increase from their previously-agreed cost, and that it would take longer for the components to be assembled. Branded would later learn that Universal negotiated a deal directly with Liddell to provide the same trailers at a lower price, excluding Branded from the agreement. Branded filed suit alleging that Universal and Liddell had intentionally interfered with the Branded-Liddell contract. Upon review, the Supreme Court found sufficient evidence that Branded made detailed assertions regarding its theories of personal jurisdiction, and the record reflected Branded presented that evidence to support those assertions. Therefore, the Court found that the trial court exceeded its discretion when it granted Universal's motion to dismiss. The Court reversed the trial court's judgment and remanded the case for further proceedings.

Plaintiffs sued the former spouse of Stephen Walsh, who was a defendant in related actions brought by plaintiffs, alleging that the property derived from Walsh's illegal securities activities went into the former spouse's possession under the parties' separation agreement and divorce decree. At issue, in certified questions to the court, was whether the former spouse had a legitimate claim to those funds, which would prevent plaintiffs from obtaining disgorgement from her. The court held that an innocent spouse who received possession of tainted property in good faith and gave fair consideration for it should prevail over the claims of the original owner or owners consistent with the state's strong public policy of ensuring finality in divorce proceedings.

In two consolidated original jurisdiction actions, petitioners Mylan, Inc., Mylan Pharmaceuticals, Inc., and Mylan Technologies, Inc. sought writs of prohibition in two actions pending in the circuit court of Kanawha County. In each action, the circuit court denied a motion filed by petitioners to dismiss the case on the basis of forum non conveniens. Petitioners filed a petition for a writ of prohibition, asserting that each of the circuit judges erred in applying the forum non conveniens statute, W. Va. Code 56-1-1a, and seeking to prohibit the circuit court from refusing to dismiss their actions. In a show cause order, the Supreme Court held that the circuit court erred in failing to make findings of fact and conclusions of law regarding the eight factors listed for consideration in Section 56-1-1a. The Court, therefore, granted the writs and remanded the actions.

Petitioner Brady Farr appealed a circuit court judgment in favor of Respondents The Gulf Agency, Orange Beach Insurance Agency and Lexington Insurance Company. Mr. Farr finished renovating his house in 2003. In 2004, he decided to sell his property to a developer who wished to turn the property into condominiums. In anticipation of the sale, Mr. Farr obtained a $1 million loan, secured by a mortgage. As part of the loan process, the mortgage company ordered an appraisal of the property. The property was appraised at $1.3 million and the improvements were valued at $313,000. In 2004, Mr. Farr contacted Orange Beach to insure the property against "total loss." Lexington, acting as Orange Beach's agent, submitted an insurance application for policy limits based on the appraisal to The Gulf Agency, who ultimately served as underwriter for the policy. In the fall of 2004, Mr. Farr was concerned that the policy limits were not sufficient to adequately cover a total loss of the property. In September, Mr. Farr's concerns were realized when Hurricane Ivan destroyed the property. He filed a claim with Orange Beach. In November, Mr. Farr sold his property for $1.18 million. The sales agreement was amended to reflect the total loss he suffered as a result of the hurricane. Lexington's adjuster visited the property to determine the cause of Mr. Farr's loss. The adjuster found the hurricane was the "proximate cause". Lexington subsequently paid Mr. Farr $50,000 for the damage. Alleging that the policy did not provide adequate coverage and that Lexington failed to pay the proper benefits under the policy, Mr. Farr sued the insurance companies for breach of contract, fraud, misrepresentation, negligence, conspiracy, and bad-faith failure to pay an insurance claim. The trial court granted the companies' motion for summary judgment, finding that some of Mr. Farr's claims were barred by a two-year statute of limitations. Upon review of the trial court record, the Supreme Court affirmed the lower court's judgment pertaining to Mr. Farr's tort claims. The Court found that those claims were indeed barred by a statute of limitations. The Court however found that the breach of contract and bad faith claims should not have been dismissed through summary judgment. The Court affirmed part and reversed part of the lower court's order and remanded the case for further proceedings.

LTTS Charter School ("LTTS") was an open-enrollment school that retained C2 Construction, Inc. ("C2") to build school facilities at a site Universal Academy had leased. C2 filed a breach of contract suit and Universal Academy filed a plea to the jurisdiction claiming immunity from suit. The trial court denied the plea and Universal Academy brought an interlocutory appeal under Section 51.014(a)(8) of the Civil Practice and Remedies Code. In the court of appeals, C2 moved to dismiss the interlocutory appeal, arguing that Universal Academy was note entitled to one because it was not a governmental unit under the Torts Claims Act ("Act"), Tex. Civ. Prac. & Rem. Code 101.001(3)(D). At issue was whether an open-enrollment charter school was a governmental unit as defined by Section 101.001(3)(D) and thus, able to take an interlocutory appeal from a trial court's denial of its plea to the jurisdiction. The court held that open-enrollment charter schools were governmental units for the Act purposes because the Act defined government unit broadly to include any other institution, agency, or organ of government derived from state law; the Education Code defined open-enrollment charters schools as part of the public school system, which were created in accordance with the laws of the state, subject to state laws and rules governing public schools and, together with governmental traditional public schools, have the primary responsibility for implementing the state's system of public education; and the Legislature considered open-enrollment charter schools to be governmental entities under a host of other laws outside the Education Code. Accordingly, because Universal Academy was a governmental unit under the Act, the court of appeals had jurisdiction to hear its interlocutory appeal under Section 51.014(a)(8).

Respondent optometrist Steven Hobbs sublet space leased by Cole Vision Corporation (Cole Vision) from Sears Roebuck and Company (Sears) for his optometry practice. The sublease agreement between Hobbs and Cole Vision contained indemnity provisions whereby Hobbs agreed to defend Cole Vision and Sears against any and all liabilities arising from events occurring in Hobbs' business location or as a result of Hobbs' activities at the business. The agreement also purportedly required Cole Vision to retain copies of Hobbs' patient records. Pursuant to the agreement, Hobbs obtained professional liability insurance with NCMIC Insurance Company (NCMIC). Mary and John Lewis (the Lewises) sued Hobbs, Cole Vision, and Sears based on Hobbs' alleged malpractice in failing to properly diagnose and treat Mary Lewis. Cole Vision and Sears brought this action for declaratory relief after Hobbs and NCMIC refused to defend them in the malpractice suit. Although the Lewises' case was pending when Cole Vision brought this declaratory judgment action, it eventually settled. Cole Vision and Sears also sought judgment against Hobbs and NCMIC for defense costs and settlement amounts of the malpractice action brought by the Lewises. In response to the complaint, Hobbs filed a defense and counterclaim for negligent spoliation of evidence against Cole Vision and Sears stemming from the loss of Mary Lewis's patient profile sheet. Hobbs contended that Cole Vision lost the profile sheet, which was a key piece of evidence needed to defend the malpractice claim. According to Hobbs, he incurred costs and attorney fees as a result of his inability to adequately defend against the Lewises' claim for malpractice. Cole Vision filed a motion to dismiss on the ground that South Carolina does not recognize a cause of action for spoliation of evidence. The circuit court agreed and granted the motion to dismiss. Hobbs appealed the circuit court's order and the court of appeals reversed the circuit court, finding that Hobbs pled facts sufficient to constitute a general negligence cause of action. The court of appeals did not determine whether South Carolina recognizes a cause of action for negligent spoliation, instead reversing the circuit court based on its characterization of Hobbs' claim as a general negligence claim. Upon review of the record of the courts below, the Supreme Court found that Hobbs' claim that Cole Vision breached a contractual duty to maintain the document at issue remained a viable defense in his action for indemnification. The Court declined to recognize the tort of negligent spoliation of evidence and accordingly found that the circuit court properly dismissed it as a counterclaim. The Court reversed the appellate court's decision and remanded the case for further proceedings.