Justia Contracts Opinion SummariesArticles Posted in U.S. 6th Circuit Court of Appeals
McCarthy v. Ameritech Publ’g, Inc.
McCarthy worked at Ameritech, a wholly owned subsidiary of AT&T, until her position was terminated in 2008 as part of a reduction in forces. She sought to retire at that time to care for her ailing husband, but Ameritech allegedly told her that she was not eligible to receive post-retirement healthcare benefits, on which her husband depended. She elected to continue working through the company’s Employment Opportunity Pool for another nine months, until she turned 65 and retired with benefits. She then filed suit alleging, among other things, age and sex discrimination. After Ameritech admitted that McCarthy was, in fact, entitled to post-retirement healthcare benefits when it terminated her position in 2008, she amended her suit to add a claim for fraudulent inducement. The district court awarded summary judgment, rejecting the merits of each claim. The Sixth Circuit reversed in part. McCarthy may present her fraudulent-inducement claim to a jury. The district court properly awarded summary judgment to the defendants on each of the other claims View "McCarthy v. Ameritech Publ'g, Inc." on Justia Law
Moyer v. Metropolitan Life Ins. Co
As a Solvay employee Moyer participated in Solvay’s ERISA- governed Long Term Disability Plan. In 2005 MetLife initially approved Moyer’s claim for benefits. MetLife reversed its decision in 2007 after determining that Moyer retained the physical capacity to perform work other than his former job. In an administrative appeal, MetLife affirmed the revocation on June 20, 2008. Moyer’s adverse benefit determination letter included notice of the right to judicial review but failed to include notice that a three-year contractual time limit applied. The Summary Plan Description failed to provide notice of either Moyer’s right to judicial review or the applicable time limit. On February 20, 2012, Moyer sued MetLife, seeking recovery of unpaid plan benefits under 29 U.S.C. 1132(a)(1)(B). The district court held that the plan’s limitations period barred Moyer’s claim, noting that the plan documents—which were not sent to participants unless requested—stated that there was a three-year limitations period for filing suit, so that MetLife provided Moyer with constructive notice of the contractual time limit. The Sixth Circuit reversed. Exclusion of the judicial review time limits from the adverse benefit determination letter was inconsistent with ensuring a fair opportunity for review and rendered the letter not in substantial compliance. View "Moyer v. Metropolitan Life Ins. Co" on Justia Law
Automated Solutions Corp. v. Paragon Data Sys., Inc.
In 2001, ASC and Paragon entered into a contract to develop and support computer software for the Chicago Tribune. This software, called the “Single Copy Distribution System” (SCDS) would allow the Tribune to manage and track newspaper deliveries and subscriptions. Tensions emerged and Paragon terminated the contract in 2003. ASC successfully sued Paragon in Ohio state court, obtaining a declaration that ASC was the sole owner of the SCDS. In federal court, ASC alleged copyright infringement, trademark infringement, breach of contract, conversion, tortious interference with a business relationship, unjust enrichment, and unfair competition based on Paragon’s alleged copying of the SCDS software to use in its DRACI software, developed in 2004 for another newspaper. After eight years of litigation, the district court granted summary judgment to Paragon on all claims. The Sixth Circuit affirmed, stating that ASC had never submitted any evidence identifying the unique protectable elements of SCDS, and that there was insufficient evidence to generate even an implication that DRACI is substantially similar to SCDS. View "Automated Solutions Corp. v. Paragon Data Sys., Inc." on Justia Law
Eastham v. Chesapeake Appalachia, L.L.C.
In 2007, the Easthams entered into a five-year lease with Chesapeake, granting the right to extract oil and gas from the Easthams’ 49 acres in Jefferson County, Ohio. The Easthams were granted a royalty of one-eighth of the oil and gas produced from the premises. Until a well was commenced on the premises, the Easthams were entitled to “delay rental” payments of $10 per acre annually. The lease stated “Upon the expiration of this lease and within sixty (60) days thereinafter, Lessor grants to Lessee an option to extend or renew under similar terms a like lease.” In 2012, Chesapeake filed a notice of extension with the County Recorder and sent the Easthams a letter stating that it had extended the lease on the same terms for an additional five years, with a delay rental payment for $490.66. The Easthams later claimed that they did not read and did not understand the lease, but were not pressured into signing it. They filed a class action, seeking a declaration that the lease expired and that title to the oil and gas underneath the property be quieted in their favor. They claimed that the agreement did not give Chesapeake the option to unilaterally extend, but required that the parties renegotiate at the end of the initial term. The district court entered summary judgment for Chesapeake, concluding that the lease’s plain language gave Chesapeake options either to extend the lease under its existing terms or renegotiate under new terms. The Sixth Circuit affirmed View "Eastham v. Chesapeake Appalachia, L.L.C." on Justia Law
Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of MI
Hi-Lex has about 1,300 employees. Blue Cross Blue Shield of Michigan (BCBSM) served as a third-party administrator (TPA) for Hi-Lex’s Health and Welfare Benefit Plan since 1991. Under the Administrative Services Contracts (ASCs) between the parties, BCBSM agreed to process healthcare claims for Hi-Lex employees and grant those employees access to BCBSM’s provider networks. BCBSM received an “administrative fee” set forth in ASC Schedule A on a per-employee, per month basis. In 1993, BCBSM implemented a new system, “retention reallocation,” to retain additional revenue. Regardless of the amount BCBSM was required to pay a hospital for a given service, it reported a higher amount that was then paid by the self-insured client. Hi-Lex allegedly was unaware of the retention reallocation until 2011, when BCBSM disclosed the fees in a letter and described them as “administrative compensation.” Hi-Lex sued, alleging breach of fiduciary duty under the Employee Retirement Income Security Act, 29 U.S.C. 1104(a). The court awarded Hi-Lex $5,111,431 in damages and prejudgment interest of $914,241. The Sixth Circuit affirmed that: BCBSM was an ERISA fiduciary and breached its fiduciary duty under ERISA section 1104(a), that BCBSM conducted “self-dealing” in violation of section 1106(b)(1), and that Hi-Lex’s claims were not time-barred. View "Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of MI" on Justia Law
Nielsen v. McLean
Minnesota-based Everest breeds and races thoroughbreds. Crestwood is a thoroughbred farm in Kentucky. The businesses began working together in 1993. The parties entered a more definite arrangement in 2008, for sale of Everest’s horses. Everest would transfer ownership of more than 100 horses to Crestwood, which would pay the horses’ day-to-day costs and would sell the horses at a public auction or a private sale. The agreement prohibited Crestwood from setting a “reserve” on any horse, a price floor below which the sale would not go. Crestwood was to keep 25-50 percent of the proceeds from each sale. The agreement provided that Island Fashion and its unnamed filly would be sold at auction, but remained Everest’s property. Crestwood tried to sell several horses, including the Island Fashion filly. There were bids of $850,000 and $875,000 for the filly. Everest had planted a separate agent at the auction without Crestwood’s knowledge, who tried to drive the selling price higher by placing a $900,000 bid. The sale failed. After learning what Everest had done, Crestwood kept $219,513.89, 25 from selling other horses based on the failed high bid for the filly (plus auction fees). Everest sued and Crestwood counterclaimed. The district court granted summary judgment to Crestwood and awarded $272,486.30 in attorney’s fees. The Sixth Circuit affirmed. View "Nielsen v. McLean" on Justia Law
Performance Contracting Inc. v. Dynasteel Corp.
Consumers Energy entered into a Purchase Order, under which DynaSteel, operating in Tennessee and Mississippi, would fabricate ductwork for shipment to an Essexville, Michigan power plant for installation by a third party. The PO contained a Michigan choice-of-law provision. Consumers was to pay $10,634,755. PCI, with locations in Kansas and Tennessee, was to supply the insulation requested by Consumers for $1,842,890. The contract between DynaSteel and PCI contained a Tennessee choice-of-law provision. As the project progressed, Consumers paid DynaSteel $2.9 million, but DynaSteel did not pay PCI $1,542,890 it owed. DynaSteel also owed PCI more than $3.2 million for other projects. DynaSteel allegedly comingled Consumer’s payments with funds from other projects. Under a “Payment Plan Proposal,” DynaSteel was to make payments, which would apply to the unpaid orders in chronological order (the Consumers project came last in this order). The PPP did not contain a choice-of-law provision. DynaSteel paid PCI $2.1 million, which satisfied its obligations concerning the other projects, but did not fulfill its obligation as to the Consumers project. PCI sued in Michigan, alleging that DynaSteel violated the Michigan Builders Trust Fund Act. The district court entered summary judgment for Dynasteel, reasoning that the PO between PCI and DynaSteel was controlling, that the Tennessee choice-of-law provision was binding, and that the Trust Fund Act did not apply extraterritorially by its own force. The Sixth Circuit affirmed. View "Performance Contracting Inc. v. Dynasteel Corp." on Justia Law
CNA Ins. Co. v. Hyundai Merch. Marine Co., Ltd.
Corning hired Hyundai, an ocean shipper, to transport thin glass sheets for use in televisions and computer monitors from the U.S. to Asia. Although it is not clear when the damage occurred, damage was noted when Hyundai unloaded the containers from flatcars operated by its subcontractors (Norfolk Southern Railway and BNSF, another rail carrier). Corning had no role in selecting and no relationship with the subcontractors. There were opinions that the damage was caused by movement of the railcars, not by packing, but the actual cause was not established. Corning’s insurer paid Corning $664,679.88 and filed suit. The district court held that the case would proceed solely under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. 11706, apparently reasoning that the damage undisputedly occurred while the cargo was in the possession of a rail carrier. The court found that a Subcontracting Clause did not immunize the rail carriers from suit, but obligated Corning to indemnify Hyundai for any resultant claims by a subcontractor against Hyundai arising out of the same facts. The court held that a $500-per-package limit of liability did not apply to the rail carriers or Hyundai. After a jury trial, the court found Hyundai and the railroads liable, but denied prejudgment interest. The Sixth Circuit affirmed the judgment against Hyundai, reversed and vacated judgments against the railroads, and remanded for reconsideration of prejudgment interest.View "CNA Ins. Co. v. Hyundai Merch. Marine Co., Ltd." on Justia Law
Shazor v. Prof’l Transit Mgmt., Ltd.
PTM provided the services of a CEO to the Southwest Ohio Regional Transit Authority (SORTA) to control daily operations, while ultimate management authority remained with SORTA’s Board of Trustees. PTM hired Plaintiff as SORTA’s Chief Operating Officer. Plaintiff, an African American woman, a graduate of West Point and University of Michigan Business School, had no prior industry experience. Two years later, PTM changed hands and Plaintiff became CEO on an at-will basis. Within months, PTM began questioning her allegiance to PTM. Plaintiff repeatedly declined to participate in PTM programs. Tensions escalated during negotiations for renewal of PTM’s management contract, which prohibited PTM employees from working for SORTA within a year of its expiration. Plaintiff’s PTM contract contained the same prohibition. PTM suspected that Plaintiff and SORTA were conspiring to have SORTA hire Plaintiff directly. The contract was extended and the one-year hiring prohibition was removed from the contracts. PTM executives continued to regard Plaintiff as a “prima donna” and exchanged several emails critical of Plaintiff. Following a dispute concerning unionization of SORTA workers, PTM fired Plaintiff, purportedly for lying about the dispute. The district court rejected Plaintiff’s discrimination action under Title VII of the Civil Rights Act, 42 U.S.C. 2000e. The Sixth Circuit reversed and remanded, finding PTM’s investigation inadequate to establish that Plaintiff lied.View "Shazor v. Prof'l Transit Mgmt., Ltd." on Justia Law
Henry v. Chesapeake Appalachia, LLC
In 2006, Plaintiffs entered into a five-year oil and gas lease covering 47 acres in Ross Township, Ohio, and granting Chesapeake exclusive rights to “all oil and gas and their constituents” for $5.00 per mineral acre per year and a royalty on production. The lease provides for extension, if “Operations” are being “conducted on the Leasehold, or on lands pooled, unitized or combined with all or a portion of the Leasehold.” In 2011, Chesapeake submitted drilling-permit applications for property that did not include Plaintiffs’ property. Later, Chesapeake filed a “Declaration and Notice of Pooled Unit,” consisting of 21 properties, including Plaintiffs’ property, and declared that “operations and/or production … anywhere within the Unit shall be deemed to be operations and/or production on each separate tract sufficient to extend and maintain each included lease in the Unit.” It specified that production from the unit would be allocated among all leases in the unit proportional to the surface area of each lease. Plaintiffs sought a declaration that the lease expired; Chesapeake filed a counterclaim. The district court ruled in favor of Plaintiffs, concluding that Chesapeake’s actions did not extend the lease because the lease required that a permit application pertaining to the leased property or a property already unitized with the leased property, be filed before the expiration of the lease. The Sixth Circuit reversed and remanded. View "Henry v. Chesapeake Appalachia, LLC" on Justia Law