Justia Contracts Opinion Summaries

Plaintiffs brought their Verified Complaint asserting claims for breach of contract and breach of the implied covenant of good faith and fair dealing against defendant. J.P.Morgan also asserted a claim for attorneys' fees and costs under an option agreement that J.P. Morgan and defendant entered into, which was the contract central to the dispute. Defendant moved to dismiss pursuant to Court of Chancery Rule 12(b)(6). The court held that J.P. Morgan has failed to state a claim that defendant breached the express terms of the Option Agreement and therefore, defendant's motion to dismiss was granted as to Count I. Defendant's motion to dismiss was denied as to Count II because J.P. Morgan's allegations, taken together, were sufficient to state a claim of the implied covenant. Finally, defendant's motion to dismiss was denied as to Count III where J.P. Morgan could eventually be the prevailing party in this action.

This case concerned the applicability of a standard "no-action clause" in a trust indenture governing a company's notes. The clause at issue stated that a noteholder could not "pursue any remedy with respect to this Indenture or the Securities" unless the noteholder fell within one of two exceptions. At issue was whether noteholders who did not fall within a stated exception to the clause could nonetheless bring fraudulent transfer claims against the issuer of the securities and its directors and officers. Although the district court found the no-action clause inapplicable to the claims, the court disagreed and held that the language of the no-action clause controlled, barring noteholders from bringing suit.

In addition to about $4 million invested through his family corporation, Nonneman personally invested about $15 million in OKO for domestic oil and gas exploration, although he had no experience in such businesses, was showing signs of dementia, and suffered disabilities. In 2003, Nolfi assumed management of Nonneman’s affairs and it was apparent that the OKO investments would yield no returns. Of 128 wells, only 11 produced oil, and did not produce enough to recoup the investment. Nolfi filed suit in Ohio state court and learned facts that gave rise to federal and state securities claims. He filed in federal court, alleging violations of the Securities Act of 1933, 15 U.S.C. 78j(b) and 77l(a)(1); violations of the Ohio Blue Sky laws by the sale of unregistered securities; federal securities fraud; misrepresentation; common law fraud; breach of fiduciary duties; and breach of contract. The cases were consolidated and, after complicated rulings concerning limitations periods, the district court entered judgment for Nonneman. Despite having stated rescissory damages as more than $7 million, the jury only listed an award of $1,777,909 on its verdict form. The court held that plaintiffs had waived their right to challenge the verdict. Sixth Circuit affirmed.

Nonneman, acting through Fencorp, a family investment corporation, invested $3,980,345.50 in OKO for domestic oil and gas exploration, although he had no experience in such businesses, was showing signs of dementia, and suffered disabilities. In 2003, Nolfi assumed management of Nonneman’s affairs and it was apparent that the OKO investments would yield no returns. Of 128 wells, only 11 produced oil, and did not produce enough to recoup the investment. Nolfi filed suit in Ohio state court. During discovery plaintiffs learned facts indicating federal and state securities violations and filed in federal court, alleging violations of the Securities Act of 1933, 15 U.S.C. 77l(a)(1); violations of the Ohio Blue Sky laws by the sale of unregistered securities; federal securities fraud; common law fraud; misrepresentation; breach of fiduciary duties; and breach of contract. After a complicated set of rulings, the district court awarded Fencorp $1,012,835.50, the maximum not barred by the statute of repose. The Sixth Circuit affirmed in part, upholding rulings concerning the statute of repose, but setting aside the verdict on the state common law fraud claim and directing reinstatement of the verdict on the federal securities claim ($847,858).

Defendant Randy J. Rouleau appealed the decision of the Washington Civil Division which held that Wells Fargo Bank Minnesota, N.A., as Trustee for the registered holders of Credit Suisse First Boston Mortgage Security Corp., Commercial Mortgage Pass-Through Certificates, Series 2001-CF2 (Wells Fargo), was entitled to enforce his personal guaranty of a promissory note secured by mortgages on five mobile home parks.  The civil division concluded that Wells Fargo could enforce the guaranty as the holder of the note under 9A V.S.A. § 3-301(i), which defines who may enforce a negotiable instrument.  Defendant argued that the court erred in ruling that Wells Fargo has standing to enforce the guaranty because Wells Fargo could not prove the chain of assignments from the original lender to itself and therefore that Wells Fargo, and not some third party, is the assignee of the guaranty.  Defendant also argued that the court erred in treating assignment of the note as sufficient to show assignment of the guaranty because the guaranty, in contrast to the note, is a separate contract that must be expressly assigned.  Finally, defendant argued that because Wells Fargo lacked standing to enforce the guaranty, the court lacked jurisdiction over the enforcement action.  Based on the evidence presented, the Supreme Court could not conclude that the court's finding that Wells Fargo was assigned the note and mortgage was clearly erroneous.  Moreover, the court's finding on this point, essential to Wells Fargo's status as a holder, directly supports its conclusion that Wells Fargo has standing to enforce the guaranty.  Because Wells Fargo had standing, Defendant's final argument that the court lacked jurisdiction over the enforcement action has no merit. The Supreme Court affirmed the civil division.

The brokerage entered into agreements with customers that set a fee for handling, postage, and insurance for mailing confirmation slips after each securities trade. Plaintiff filed claims of breach of contract and unjust enrichment, seeking class certification and recovery of fees charged since 1998. The brokerage removed to federal court under the Class Action Fairness Act, 28 U.S.C. 1332(d), or the Securities Litigation Uniform Standards Act 15 U.S.C. 78p(b) and (c) and 78bb(f), and obtained dismissal. The Seventh Circuit affirmed, first holding that SLUSA did not apply because any alleged misrepresentation was not material to decisions to buy or sell securities, but CAFA's general jurisdictional requirements were met. The agreement did not suggest that the fee represents actual costs, and it was not reasonable to read this into the agreement. Nor did the brokerage have an implied duty under New York law to charge a fee reasonably proportionate to actual costs where it notified customers in advance and they were free to decide whether to continue their accounts.

Defendant sells brokerage and investment products and services, typically to registered broker-dealers and investment advisers that trade securities for clients. One of its services, NetExchange Pro, an interface for research and managing brokerage accounts via the Internet, can be used for remote access to market dynamics and customer accounts. A firm may make its clients' personal information, including social security numbers and taxpayer identification numbers, accessible to end-users in NetExchange Pro. Some of defendant's employees also have access to this information. Plaintiff, a brokerage customer with NPC, which made its customer account information accessible in NetExchange Pro, received notice of the company's policy and filed a putative class action, alleging breach of contract, breach of implied contract, negligent breach of contractual duties, and violations of Massachusetts consumer protection laws. The district court dismissed. The First Circuit affirmed. Despite "dire forebodings" about access to personal information, plaintiff failed to state any contractual claim for relief and lacks constitutional standing to assert a violation of any arguably applicable consumer protection law.

This appeal concerned the maintenance of a suit for rescission under section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq., by plaintiffs Kenneth Weiss and his wholly-owned corporation. The district court granted summary judgment to defendants on all claims and awarded defendants attorneys' fees. The court held that a plaintiff suing under section 10(b) seeking rescission must demonstrate economic loss and that the misrepresentation or fraud conduct caused the loss. The court found that the record revealed that rescission was not feasible in the instant case. Yet employing a rescissionary measure of damages, Weiss would be able to convince the finder of fact that he was entitled to relief. On that basis, the court reversed the district court's grant of summary judgment of Weiss's federal and state securities claims and remanded for consideration under a rescissionary measure of damages. With respect to the statue of limitations issue, the court remanded for consideration in light of Merck & Co., Inc. v. Reynolds. The court affirmed the district court's judgment on Weiss's state law claims of common law fraud, negligent misrepresentation, mutual mistake, and unjust enrichment. The court vacated the district court's attorneys' fee award and dismissed the appeal of this award as moot.

Former customers of RCM, a subsidiary of the now-bankrupt Refco, appealed from a dismissal of their securities fraud claims against former corporate officers of Refco and Refco's former auditor. RCM operated as a securities and foreign exchange broker that traded in over-the-counter derivatives and other financial products on behalf of its clients. Appellants, investment companies and members of the putative class, claimed that appellees, former officers and directors of Refco, breached the agreements with the RCM customers when they rehypothecated or otherwise used securities and other property held in customer brokerage accounts. The district court dismissed the claims for lack of standing and failure to allege deceptive conduct. The court held that appellants have no remedy under the securities laws because, even assuming they have standing, they failed to make sufficient allegations that their agreements with RCM misled them or that RCM did not intend to comply with those agreements at the time of contracting.

Plaintiff sued defendant asserting causes of action for breach of fiduciary duty, gross negligence, and breach of contract where the gravamen of the complaint was that defendant mismanaged the portfolio of an entity whose obligations plaintiff guaranteed. At issue was whether the Martin Act, General Business Law art 23-A, preempted plaintiff's common-law causes of action for breach of fiduciary duty and gross negligence. The court agreed with plaintiff that the Martin Act did not preclude a private litigant from bringing a nonfraud common-law cause of action where the Martin Act did not expressly mention or otherwise contemplate the elimination of common-law claims.