Justia Contracts Opinion SummariesArticles Posted in U.S. 3rd Circuit Court of Appeals
VICI Racing LLC v. T-Mobile USA Inc.
VICI, a sports car racing team, sought T-Mobile’s sponsorship for the 2009-2011 Le Mans racing seasons. The companies entered into an agreement that required VICI to field one T-Mobile-sponsored racecar during the 2009 season and two during each of the 2010 and 2011 seasons and required VICI to display T- Mobile’s logo. The agreement provides that “VICI grants to [T-Mobile] the right to be the exclusive wireless carrier supplying wireless connectivity for the Porsche, Audi and VW telematics programs.” The Agreement had a force majeure clause, a severability clause, and a “Limitation of Liabilities.” VICI worked with T-Mobile to secure telematics business from VW, Audi, and Porsche. In July 2009, T-Mobile’s sponsored racecar sustained damage from an accident and was not able to race while undergoing repairs. On January 5, 2010, VICI sent a notice of default, indicating that T-Mobile had failed to pay $7 million due under the agreement. On January 7, T-Mobile sent a letter terminating the Agreement, stating that VICI made a material representation that VICI had authority to bind Audi, VW and that VICI failed, without justification or notice, to race at a key event where T-Mobile hosted business guests. The district court awarded VICI $7 million in damages. The Third Circuit affirmed the award of $7, but vacated with regard to VICI’s damages resulting from T- Mobile’s failure to make the 2011 payment. On remand, the court should consider an award of attorney’s fees to VICI in light of its reassessment of the 2011 damages issue. View "VICI Racing LLC v. T-Mobile USA Inc." on Justia Law
Certain Underwriters at Interest at Lloyds of London v. United Parcel Serv. of Am., Inc.
Plaintiffs, the third-party insurers of a shipping service for coins and special metals, invoked their subrogation rights and alleged that several of the service’s shipments, worth a total of $150,000, were lost or stolen by United Parcel Service of America, Inc. (UPS) or its employees. Plaintiffs brought state law claims against UPS in federal district court, alleging true and fraudulent conversion, among other claims, premising subject matter jurisdiction solely upon the complete diversity of the parties. The district court dismissed the complaint for failure to state a claim, holding (1) the Carmack Amendment preempted all of Plaintiffs’ state law claims, and (2) the exception recognized by some courts when the common carrier has committed a “true conversion” of goods does not permit an action based on state law but rather abrogates the limitation of liability for causes of action brought under the Amendment itself. The Third Circuit affirmed, holding (1) the Carmack Amendment preempts all state law claims for compensation for the loss of or damage to goods shipped by a ground carrier in interstate commerce; and (2) the “true conversion” exception vitiates the liability limiting features in the Amendment and is not an exception to the Amendment’s preemptive scope. View "Certain Underwriters at Interest at Lloyds of London v. United Parcel Serv. of Am., Inc." on Justia Law
Griswold v. Coventry First LLC
In 2006, Lincoln T. Griswold purchased an $8.4 million life insurance policy. Griswold established a Trust for the sole and exclusive purpose of owning the policy and named Griswold LLP as the Trust’s sole beneficiary. In 2008, the Trust sold its policy to Coventry First LLC. The written purchase agreement contained an arbitration clause. After learning that the policy was sold for an allegedly inflated price that included undisclosed kickbacks to the broker, Griswold sued. Coventry moved to dismiss the case for lack of standing or, in the alternative, to compel arbitration. The district court denied the motion, concluding that both Griswold and the LLP had standing and that the arbitration clause was unenforceable as to the plaintiffs, who were non-signatories. Coventry appealed. The Third Circuit (1) concluded that it lacked appellate jurisdiction to review the district court’s denial of Coventry’s motion to dismiss; and (2) affirmed the district court’s denial of the motion to compel arbitration against the plaintiffs, as they never consented to the purchase agreement. View "Griswold v. Coventry First LLC" on Justia Law
Menkes v. Prudential Ins. Co. of Am.
Plaintiffs, employed by defense contractor Qinetiq to work on a military base in Iraq, were enrolled in Qinetiq’s Basic Long Term Disability, Basic Life, and Accidental Death and Dismemberment insurance policies, governed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001, under a single contract with Prudential. Qinetiq paid the premiums. Plaintiffs also purchased, with their own funds, supplemental coverage under the same terms as the basic policies; there was a single summary plan description. An employee would file a single claim for basic and supplemental coverage benefits. The plan booklets provided that loss is not covered if it results from war, or any act of war, declared or undeclared. These exclusions applied to both the basic and supplemental policies. The plaintiffs were not otherwise uninsured for excluded injuries. Qinetiq obtained insurance required by the Defense Base Act, 42 U.S.C. 1651. After Prudential denied claims, the plaintiffs sued, alleging violations of the state consumer fraud acts and the Truth in Consumer Contract, Warranty, and Notice Act; breach of contract and breach of the implied covenant of good faith and fair dealing; and intentional or negligent misrepresentation or omission. They contended that Prudential fraudulently induced them to buy supplemental coverage knowing that any claim they filed would likely be subject to the war exclusions, rendering supplemental coverage effectively worthless. The district court dismissed, treating the basic and supplemental policies as components of a single plan, and holding that all state law claims were preempted by ERISA. The Third Circuit affirmed, holding that the supplemental coverage cannot be “unbundled” from ERISA coverage. View "Menkes v. Prudential Ins. Co. of Am." on Justia Law
In re: G-I Holdings, Inc.
Facing asbestos-related personal injury lawsuits filed in the 1980s, a group of producers of asbestos and asbestos-containing products formed the Center for Claims Resolution to administer such claims on behalf of its Members. About 20 Members negotiated and signed the Producer Agreement, which established and set forth the mechanics of the Center and the obligations of the Members. After G-I failed to pay its contractually-calculated share of personal injury settlements and Center expenses, U.S. Gypsum and Quigley were obligated to pay additional sums to cover G-I’s payment obligations. G-I filed for bankruptcy and the Center, U.S. Gypsum, and Quigley each filed a proof of claim, seeking to recover for G-I’s nonpayment under the Producer Agreement. The Center settled its claim with G-I. The Bankruptcy Court granted summary judgment in G-I’s favor. The district court affirmed. The Third Circuit vacated, holding that the Producer Agreement permits the Former Members to pursue a breach of contract action against G-I for its failure to pay contractually-obligated sums due to the Center, in light of their payment of G-I’s share. View "In re: G-I Holdings, Inc." on Justia Law
Cardionet Inc v. Cigna Health Corp.
The Providers supply outpatient cardiac telemetry (OCT) services, used by doctors to monitor cardiac arrhythmias. The device differs from conventional technology in that it transmits electrocardiographic (EKG) data in real time to certified technicians, who forward the data to a physician. OCT is approved by the FDA, and has long been covered by Medicare and commercial insurers. CIGNA administers employer sponsored health benefit plans. CIGNA pays its in-network providers directly for the services rendered to patients. In 2007, the Providers joined CIGNA’s network by Agreements that set the reimbursement rate and define “Covered Services.” In 2012, CIGNA issued a statement that it would no longer cover OCT “for any indication because it is considered experimental, investigational or unproven.” The 2012 Policy acknowledged that this new position would be trumped by any conflicting language in the coverage policies themselves. In arriving at the new policy, CIGNA relied on the same medical literature it had previously relied upon in concluding that OCT should be covered. The Providers claim that CIGNA indicated that its motive was financial, but refused to reconsider the 2012 Policy. The district court found that the Providers’ claims fell within the arbitration clause of the Agreement. The Third Circuit vacated. The clause at issue is limited in scope to disputes “regarding the performance or interpretation of the Agreement” and the claims at issue do not relate to the performance or interpretation of the Agreement. View "Cardionet Inc v. Cigna Health Corp." on Justia Law
Acra Turf Club, LLC v. Zanzuccki
New Jersey enacted the 2002 Off-Track and Account Wagering Act, N.J. Stat. 5:5-127, providing for establishment of 15 off-track wagering (OTW) facilities. The Act authorized a license for the N.J. Sports and Exposition Authority, conditioned upon NJSEA entering into a participation agreement with other entities that held horse racing permits in 2000 (ACRA and Freehold). NJSEA, ACRA, and Freehold entered into an agreement, allocating permit rights. By 2011, only four facilities had opened. NJSEA had leased control of its tracks to the New Jersey Thoroughbred Horsemen’s Association (NJTHA) and another. The 2011 Forfeiture Amendment provided that permit holders would forfeit rights to any OTW not licensed by 2012, unless they demonstrated “making progress” toward establishing an OTW; forfeited rights would be available to other “horsemen’s organizations” without compensation to the permit holder. NJTHA qualified for forfeited rights. The 2012 Deposit Amendment extended the forfeiture date and allowed a permit holder to make a $1 million deposit for each OTW facility not licensed by December 31, 2011, retaining the “making progress” exception. The Pilot Program Act allowed installation of electronic wagering terminals in some bars and restaurants, by lessees or purchasers of NJSEA-owned racetracks, who could exchange unused OTW licenses to install electronic terminals. NJTHA secured such a license. ACRA and Freehold submitted challenged the constitutionality of the amendments under the Contracts, Takings, Due Process, and Equal Protection Clauses. The Commission determined that both ACRA and Freehold had made progress toward establishing their unlicensed OTW facilities and absolved them of the obligation to submit deposits. The district court dismissed a suit under 42 U.S.C. 1983 and 1988 on Younger abstention grounds. Subsequently, the Supreme Court decided Sprint Communications v. Jacobs, (2013), clarifying the Younger abstention doctrine. The Third Circuit reversed, finding that the action does not fit within the framework for abstention. View "Acra Turf Club, LLC v. Zanzuccki" on Justia Law
Addie v. Kjaer
The sellers own an island off St. Thomas, Virgin Islands, and a launch providing access to the island from St. Thomas. In 2004, the buyers signed land contracts and an escrow agreement to purchase the properties for $21 million and $2.5 million, respectively. Premier Title served as the escrow agent and was party to the escrow agreement. Unbeknownst to the buyers, D’Amour, the sellers’ attorney-in-fact, owned Premier. The contract required an initial deposit of $1 million. The buyers paid an additional $500,000 nonrefundable deposit to extend the closing date. The sellers were to deliver “Clear and Marketable” title and assignments of all permits, submerged land leases and other licenses necessary for occupancy of the dock and other improvements. At the scheduled closing, it was determined that dock permits had expired and that there were several exceptions to title. The sellers refused to refund the deposits. The buyers appealed district court orders, rejecting certain claims; the sellers cross-appealed other orders. D’Amour appealed some holdings. The Third Circuit affirmed in part and reversed in part, concluding that conclude that the buyers are entitled to recover the $1.5 million deposit in restitution, and that the tort claims are barred by the gist of the action doctrine. View "Addie v. Kjaer" on Justia Law
Sheet Metal Workers Int’l Ass’n v. E.P. Donnelly, Inc.
Egg Harbor Township authorized construction of a Community Center and, as required by N.J.S. 52:38-3 adopted a project labor agreement (PLA). All contractors working on the project were required to sign the PLA, which contained a “supremacy provision,” providing that the PLA, with the local Collective Bargaining Agreements, superseded any national agreement, local agreement or other collective bargaining agreement (CBA). Sambe, the general contractor, signed the PLA. Sambe subcontracted roofing work to Donnelly, which signed the PLA and agreed that any party it selected to perform work would also be required to sign the PLA. Donnelly selected the Carpenters Union to perform the work, even though it was not a signatory to the PLA, apparently because the two were parties to a CBA. Sheet Metal Workers protested. The NLRB assigned the work to Carpenters and later concluded that Sheet Metal violated the NLRA, 29 U.S.C. 185, by maintaining a section 301 suit against Donnelly and Sambe following that decision. In the parallel litigation district court granted summary judgment on Sheet Metal’s breach of contract claim. The Third Circuit granted the NLRB’s petition for enforcement of its order; vacated the breach of contract judgment against Donnelly and Sambe; and remanded the with directions to enter judgment in favor of Donnelly and to conduct further proceedings on the claim against Sambe. View "Sheet Metal Workers Int'l Ass'n v. E.P. Donnelly, Inc." on Justia Law
In Re: Nortel Networks, Inc.
The multinational telecommunications firm Nortel declared bankruptcy in 2009 and various debtors comprising the Nortel brand auctioned their business lines and intellectual property, raising $7.5 billion. The debtors subsequently disputed whether they had agreed to allocate the auction funds through arbitration. The Bankruptcy Court held that they had not agreed to arbitrate their disputes about allocation. The Third Circuit affirmed: the contract at issue does not reflect the debtors’ intent to arbitrate disputes about the auction funds. The court declined to consider the Joint Administrators’ related challenge to the Bankruptcy Court’s decision to allocate the contested funds, noting that the Bankruptcy Court has not yet held the hearing to allocate the funds, so that review would be premature. View "In Re: Nortel Networks, Inc." on Justia Law