Justia Contracts Opinion Summaries

Federal Insurance Company appealed a circuit court order denying its motion to compel arbitration of the breach-of-contract claim asserted against it by Kert Reedstrom. In 2008, Reedstrom entered into a written employment agreement with Marshall-Jackson Mental Health Board, Inc., d/b/a Mountain Lakes Behavioral Healthcare ("MLBHC"), to begin serving as its executive director in Guntersville. During the course of Reedstrom's employment with MLBHC, MLBHC held an executive-liability, entity-liability, and employment-practices-liability policy issued by Federal Insurance that generally protected certain MLBHC officers and employees described as "insureds" in the policy from loss for actions committed in the course of their employment with MLBHC. It was undisputed that Reedstrom was an "insured" covered by the Federal Insurance policy. The Federal Insurance policy contained an arbitration provision. A separate endorsement to the Federal Insurance policy further highlighted the arbitration provision and explained that its effect was that any disagreement related to coverage would be resolved by arbitration and not in a court of law. In July 2010, MLBHC terminated Reedstrom's employment and, in December 2010, Reedstrom sued MLBHC alleging that his termination constituted a breach of his employment contract. MLBHC asserted various counterclaims against Reedstrom based on his alleged misconduct while serving as executive director. Thereafter, Reedstrom gave Federal Insurance notice of the claims asserted against him and requested coverage under the terms of the Federal Insurance policy. Federal Insurance ultimately denied his claim and refused to provide him with counsel to defend against MLBHC's claims. A jury returned a verdict awarding Reedstrom $150,000 on his claim against MLBHC and awarding MLBHC $60,000 on its claims against Reedstrom. Consistent with its previous denial of his request for coverage, Federal Insurance refused Reedstrom's request to satisfy the judgment entered against him. Reedstrom sued Federal Insurance, asserting one claim of breach of contract and seeking $72,000 in damages ($60,000 for the judgment entered against him and $12,000 for the attorney fees he incurred in defending those claims). The Supreme Court reversed and remanded, finding that the trial court did not articulate its rationale for denying the motion to compel arbitration. The denial was apparently based on the court's resolving at least one of the arbitrability issues raised by Reedstrom in his favor and against Federal Insurance. However, because the subject arbitration provision delegated to the arbitrators the authority to resolve such issues, the trial court erred by considering the waiver and nonsignatory issues raised by Reedstrom instead of granting the motion to compel arbitration and allowing the arbitrators to resolve those issues. View "Federal Insurance Company v. Reedstrom" on Justia Law

In 1992, Plaintiff was convicted of a felony drug offense. In 2006, Plaintiff applied to the Fairfax County School Board for a teaching position and disclosed her prior conviction on her application. The Board subsequently hired Plaintiff as a special education teacher. In 2012, the school system’s Assistant Superintendent for Human Resources determined that, pursuant to Va. Code 22.1-296.1(A), Plaintiff’s 2006 hiring had been in error because her conviction made her ineligible for employment by the Board. The Board subsequently filed a complaint seeking a declaratory judgment that section 22.1-296.1(A) made Plaintiff ineligible for hire. The circuit court entered an order declaring that the Board lacked authority to hire Plaintiff under section 22.1-296.1(A). The Supreme Court affirmed, holding that the Board lacked authority to make the contract, and therefore, the contract was void ab initio. View "Butler v. Fairfax County School Board" on Justia Law

James Armour’s employment contract with AM General LLC entitled him to payment of a long-term incentive plan (LTIP). When Armour retired, he was to receive a lump sum LTIP payment, but instead he started receiving quarterly installment payments in the form of checks. AM General attempted to make the final installment payment with a subordinate promissory note. Armour rejected the Note and requested full payment. Thereafter, AM General filed a complaint seeking a declaratory judgment that it had not breached the LTIP portion of its agreement with Armour. Armour counterclaimed, asserting that AM General breached the employment agreement by failing to pay Armour the full LTIP payment when it was due and claiming that, by attempting to pay the remaining portion of the LTIP payment with a promissory note, AM General breached the duty of good faith and fair dealing. The trial court entered summary judgment in favor of Armour. The Court of Appeals reversed, finding a genuine issue of material fact with regard to how “payment” could be made under the LTIP provision of the agreement. The Supreme Court granted transfer and affirmed the grant of summary judgment, holding that AM General breached its employment agreement with Armour because the Note did not constitute payment under the employment agreement. View "AM General LLC v. Armour" on Justia Law

In 2000, plaintiff accepted the Gray law firm’s offer of employment as an associate attorney, including a provision requiring both parties to submit all disputes relating to the employment relationship to binding arbitration. In 2005, Gray merged into DLA Piper. In 2006, plaintiff signed a “Confidential Resignation Agreement and General Release of Claims.” DLA agreed to continue to provide insurance and other benefits until August 2006, when his employment would officially terminate. The Termination Agreement is silent concerning dispute resolution. Plaintiff later sued, alleging: breach of the implied covenant of good faith and fair dealing; breach of contract; promissory fraud; and constructive fraud, arguing that the firm had “undervalued” his benefits by computing them based on “artificially reduced salary figures.” DLA sought to compel arbitration. Plaintiff asserted the Termination Agreement constituted a novation, extinguishing the arbitration provision, and that even if the provision had survived, claims involving the benefit plan were not subject to arbitration. The court compelled arbitration. In 2013, the arbitrator determined DLA had breached the Termination Agreement and plaintiff had suffered emotional distress, and awarded $41,000 in contract damages plus interest, $45,000 in emotional distress damages, and $7,535.67 in costs. The court of appeal affirmed confirmation of the award. View "Jenks v. DLA Piper Rudnick Gray Cary" on Justia Law

Petitioner was terminated from her position as the Clerk-Treasurer of the Town of Hurlock two and one-half years after she entered into a written employment agreement with the Mayor-elect. Under the employment agreement, Petitioner was to serve a four-year term. Petitioner brought this action against Respondent, the Town, alleging breach of contract and seeking damages and other relief. The circuit court dismissed the complaint, concluding that the four-year term of employment in the agreement was inconsistent with the Town Charter and therefore ineffective. The Court of Special Appeals affirmed. The Court of Appeals affirmed, holding (1) the language of the Town Charter means that an official like the Clerk-Treasurer is an at-will employee; and (2) the Mayor and Council of Hurlock lacked authority under the Town Charter to enter into an agreement conferring a fixed term of employment in this case. View "Clough v. Mayor & Council of Hurlock" on Justia Law

Plaintiffs, 19 workers employed by Degeller, filed a class action suit on behalf of themselves and similarly situated Deggeller employees. The court concluded that the district court erred in dismissing the breach of contract claim where the workers’ allegation that Deggeller failed to pay the prevailing wage stated a valid claim for breach of their employment contracts. The court also concluded that the district court erred in dismissing the workers' claim for statutory damages under 26 U.S.C. 7434 because they alleged that Deggeller intentionally filed fraudulent tax documents on their behalf. Accordingly, the court reversed the district court’s Rule 12(b)(6) dismissals of these claims and vacate its decision under 28 U.S.C. 1367(c)(3) not to exercise supplemental jurisdiction over the Arkansas minimum wage claim. View "Cuellar-Aguilar v. Deggeller Attractions, Inc." on Justia Law

Plaintiff-appellant Jeffrey Huber brought this action against his former employer, Lightforce USA, Inc. (“LFUSA”), for breach of contract and failure to pay wages. Huber’s claims centered on two employment agreements: a Company Share Offer (“CSO”), and a Deed of Non-Disclosure, Non-Competition and Assignment (“NDA”). Huber claimed that upon his termination LFUSA was obligated to pay him the value of 30% of the goodwill of LFUSA under the CSO and twelve months’ pay under the NDA. The parties agreed that the CSO was a deferred compensation plan and was, therefore, governed by the Employee Retirement Income Security Act (“ERISA”). At a bench trial, Huber succeeded only on his breach of contract claim under the NDA. Huber timely appealed the district court’s rulings on summary judgment: (1) holding that the amount owed under the NDA was not wages under the Idaho Wage Claims Act, (2) dismissing his wrongful termination claim, and (3) holding that the CSO was a “top hat” plan under ERISA and, therefore, exempt from ERISA’s vesting and anti-forfeiture provisions. Huber also appealed the district court’s ruling at trial that Huber forfeited the benefit under the CSO, and the district court’s rulings on post-trial motions: (1) denying his claim for equitable relief, (2) calculating Huber’s award of prejudgment interest, and (3) awarding attorney fees and costs to LFUSA. The Supreme Court affirmed the district court in part and reversed in part, finding: (1) the CSO was a top hat plan under ERISA and that Huber forfeited the benefit under the CSO; (2) it was proper to deny Huber’s claim for equitable relief and denying Huber’s motion to amend his complaint to conform to the evidence; (3) the district court erred by ruling that the amount owed under the NDA was not "wages" under the Idaho Wage Claims Act; (4) the district court erred with respect to prejudgment interest and costs and fees to LFUSA. The case was remanded back to the district court to treble the $180,000 judgment. Post-judgment interest shall accrue on the trebled amount of $540,000 from December 10, 2013, the date of entry of the judgment. View "Huber v. Lightforce USA, Inc." on Justia Law

Adam Ray, a former employee of Granite Buick GMC, Inc., and Scott Hanna, a former employee of McKie Ford Lincoln, Inc., left their respect employment and started their own automobile dealership. Granite Buick and McKie Ford sought injunctions to enforce non-compete agreements Defendants signed during the course of their employment. After the Supreme Court reversed and remanded, the circuit court concluded that the non-compete agreements were valid but granted judgment in favor of Defendants on their affirmative defenses. The Supreme Court affirmed, holding that the circuit court properly determined (1) Ray’s covenant not to compete was fraudulently induced; and (2) McKie Ford waived its right to enforce Hanna’s covenant not to compete. View "Granite Buick GMC, Inc. v. Ray" on Justia Law

Plaintiff sued Defendant for breach of contract and for wrongfully discharging him in retaliation for filing a workers’ compensation claim in good faith. Plaintiff’s breach of contract claim related to Defendant’s failure to remit accrued vacation pay upon his termination. A jury found in Plaintiff’s favor. The trial court rendered judgment in favor of Plaintiff, awarding him past and future lost earnings, employee benefits, and other damages. Defendant appealed the portion of the judgment on the retaliation claim. The court of appeals affirmed. The Supreme Court reversed and rendered a take-nothing judgment in favor of Defendant on Plaintiff’s retaliation claim, holding that no evidence supported the jury’s verdict on that claim. View "Kingsaire, Inc. v. Melendez" on Justia Law

Mid-Atlantic Systems of CPA, Inc. hired Appellee David Socko in March 2007 as a salesperson. Socko executed a two-year employment contract containing a covenant not to compete. In February 2009, Socko resigned from his employment with Mid-Atlantic, but the company rehired him four months later, in June 2009. At his time of rehire, Socko signed a new employment agreement containing another two-year covenant not to compete. While still employed by Mid-Atlantic, in 2010, Socko signed a third, more restrictive “Non-Competition Agreement,” which, by its terms, superseded all prior agreements. Pursuant to the Agreement (at issue in this appeal), Socko was not permitted to compete with Mid-Atlantic for two years after the termination of his employment in any of the locations Mid-Atlantic did business: Connecticut, the District of Columbia, Delaware, Maryland, New Jersey, Pennsylvania, New York, Virginia, and West Virginia. The Agreement also expressly provided for the application of Pennsylvania law, and stated that the parties intended to be “legally bound.” The issue this case presented for the Pennsylvania Supreme Court’s review was one of first impression: whether the enforcement of an employment agreement containing a restrictive covenant not to compete, entered into after the commencement of employment, could be challenged by an employee for a lack of consideration, where the agreement, by its express terms, stated that the parties “intend to be legally bound,” which language implicated the insulating effect of the Uniform Written Obligations Act (“UWOA”). After review, the Supreme Court concluded that an employee was not precluded from challenging such an agreement executed pursuant to the UWOA. View "Socko. v. Mid-Atantic Systems of CPA, Inc." on Justia Law