Justia Contracts Opinion Summaries

An airline operating among the Hawaiian Islands faced severe financial difficulties over several years, leading to its abrupt shutdown in November 2017. The airline had previously been owned by a trust affiliated with a prominent individual, then partially sold to entities controlled by other businessmen. When the airline closed, employees received only one day's notice and did not receive their final paychecks. Following the closure, a Chapter 7 bankruptcy trustee was appointed. Together with two unions representing affected employees, the trustee initiated adversary proceedings against the airline’s former owners, directors, and lenders, alleging violations of Hawaii’s Dislocated Workers Act (DWA) and the federal WARN Act for failure to provide the required notice and compensation. Additional claims included breach of fiduciary duties and requests for equitable remedies such as veil piercing and equitable subordination.The proceedings began in the United States Bankruptcy Court for the District of Hawaii, but the District Court for the District of Hawaii withdrew the reference, consolidated the cases, and conducted a jury trial. The district court granted judgment as a matter of law for some claims and allowed others to proceed. The jury returned mixed verdicts, finding some defendants liable for statutory and fiduciary duty violations, but the court denied punitive damages and limited recovery to avoid double compensation. The court also ruled on equitable remedies, including piercing the corporate veil and equitably subordinating certain loans, and ordered contribution from a third-party defendant.The United States Court of Appeals for the Ninth Circuit reviewed the district court’s judgment. It held that it had jurisdiction under 28 U.S.C. § 1291. The panel affirmed the trustee’s and unions’ Article III standing. It reversed in part on fiduciary duty claims, concluding that minority stakeholders and affiliated entities could owe fiduciary duties and be deemed “employers” under the DWA. The court clarified the statutory definition of “employer” and the scope of the DWA’s safe harbor defense, ruling it was unavailable absent a binding divestiture. The panel affirmed evidentiary rulings, vacated the nominal damages award due to erroneous jury instructions, affirmed the prohibition of punitive damages, and upheld the equitable remedies and contribution order. The judgment was affirmed in part, reversed in part, and remanded for further proceedings. View "KANE V. PACAP AVIATION FINANCE, LLC" on Justia Law

Several employees of the Space and Missile Systems Center of the United States Air Force brought a qui tam action under the False Claims Act against Jeremy Burton, the Center’s former Deputy Chief Information Officer. The plaintiffs alleged that Burton, in coordination with a defense contractor, manipulated contract awards to ensure profits were shared in violation of federal regulations, thereby submitting fraudulent payment claims to the government.Initially, Burton moved to dismiss the claims, arguing that 31 U.S.C. § 3730(e)(1) barred the suit because he was a member of the armed forces, which would preclude jurisdiction over actions brought by one member of the armed forces against another arising out of military service. The United States District Court for the Central District of California first agreed and dismissed the claims against Burton. However, after further briefing on the status of the parties, the district court reconsidered and vacated its earlier order, concluding that Burton was a civilian employee and not a member of the armed forces. The suit was permitted to proceed, and Burton appealed before the case reached final judgment.The United States Court of Appeals for the Ninth Circuit examined whether it had jurisdiction to review the interlocutory order denying Burton’s defense under section 3730(e)(1). The court held that the district court’s order did not meet the requirements of the collateral order doctrine, specifically because it was not effectively unreviewable on appeal from a final judgment. The statute at issue was determined to be a jurisdictional bar, not an immunity from suit, and thus not subject to interlocutory appeal. The Ninth Circuit dismissed the appeal for lack of jurisdiction. View "UNITED STATES V. BURTON" on Justia Law

Programmers who published open-source code on GitHub sued GitHub, Microsoft, and various OpenAI entities, alleging that GitHub Copilot and Codex—AI tools trained on publicly available code from GitHub—reproduce portions of their code without attribution. These programmers claimed that the AI’s omission of copyright management information (CMI), such as attribution and license terms required by open-source licenses, violated the Digital Millennium Copyright Act (DMCA), specifically 17 U.S.C. § 1202(b). Plaintiffs alleged that Copilot’s outputs sometimes consist of verbatim or near-verbatim reproductions of their code, but the AI-generated outputs do not include the original CMI.The United States District Court for the Northern District of California reviewed the case and dismissed the DMCA claims under Rule 12(b)(6, first with leave to amend and then with prejudice, concluding that plaintiffs failed to allege that Copilot’s outputs were “identical” to their code and that only identical copies from which CMI had been removed could support a DMCA claim. The court allowed breach of contract claims to proceed. It certified the DMCA dismissal for interlocutory appeal under 28 U.S.C. § 1292(b), noting the issue of whether § 1202(b) imposes an identicality requirement.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal. The court held that plaintiffs had Article III standing due to a plausible risk of injury. However, it determined that under their “output” theory, Copilot and Codex do not “remove or alter” CMI from copies of existing protected works; instead, they generate new works that never contained CMI. The court declined to consider the plaintiffs’ “input” theory as it was forfeited. The main holding is that generating new works without CMI does not violate § 1202(b) of the DMCA. View "DOE V. GITHUB, INC." on Justia Law

A company operating a gas station in Washington entered into a series of agreements with a petroleum refiner and a logistics company. The agreements allowed the company to rebrand its station and market motor fuel under the refiner’s trademarks, even though the refiner did not supply the actual fuel. Instead, the logistics company served as an intermediary, and fuel was sourced from a third party. Later, the refiner and logistics company claimed the agreements were terminated, demanding the removal of the trademarks. The gas station operator refused, alleging that the termination violated the Petroleum Marketing Practices Act (PMPA), which regulates the termination and nonrenewal of petroleum marketing franchises.The United States District Court for the Western District of Washington dismissed the gas station operator’s PMPA claim. The court held that no PMPA franchise existed because the refiner did not supply the fuel to either the operator or the logistics company. The court reasoned that the statute required the refiner to be the supplier of the fuel for a franchise relationship to exist under the PMPA.The United States Court of Appeals for the Ninth Circuit reviewed the dismissal de novo. It held that the PMPA does not require the refiner to supply the actual fuel; rather, a franchise exists if there is a contract authorizing the use of the refiner’s trademark in connection with the sale of motor fuel. The court determined that the operator plausibly alleged franchise relationships with both the refiner and the logistics company, based on the mutual obligations in the agreements and the statutory definitions. The Ninth Circuit reversed the district court’s dismissal of the PMPA claims and remanded the case for further proceedings. View "CAN-AM FUEL DISTRIBUTION, LLC V. SINCLAIR OIL, LLC" on Justia Law

Water districts in California that received water from the federal Central Valley Project sought to convert their water service contracts into repayment contracts under the Water Infrastructure Improvements for the Nation (WIIN) Act. This conversion allowed the districts to prepay construction costs in exchange for contracts that would last indefinitely, rather than for a set term. The Bureau of Reclamation, which manages the Central Valley Project, converted 67 contracts upon request from water districts, modifying only the payment terms and leaving other contractual rights unchanged. The Bureau did not conduct contract-specific environmental review under the National Environmental Policy Act (NEPA) or consult with wildlife agencies under the Endangered Species Act (ESA) before making these conversions.The Center for Biological Diversity and other plaintiffs challenged the Bureau’s actions in the United States District Court for the Eastern District of California. They argued that the Bureau was required to undertake NEPA review and ESA consultation before converting each contract, because the conversions would impact the environment and protected species in the Bay-Delta ecosystem. The district court compelled joinder of the affected water districts and granted summary judgment to the Bureau and the water districts. The court found that the WIIN Act imposed a mandatory duty on the Bureau to convert contracts upon request, and that the Bureau lacked discretion to alter terms for environmental protection, so NEPA and the ESA did not apply.On appeal, the United States Court of Appeals for the Ninth Circuit affirmed the district court’s judgment. The court held that section 4011(a) of the WIIN Act requires the Bureau to convert water service contracts upon request, permitting only changes related to payment structure and not to other contractual rights. Because the conversions are nondiscretionary, the Bureau is not required to conduct NEPA review or ESA consultation. The Ninth Circuit also found that this interpretation does not violate the WIIN Act’s savings clauses. View "CENTER FOR BIOLOGICAL DIVERSITY V. UNITED STATES BUREAU OF RECLAMATION" on Justia Law

A dispute arose concerning the payment rate for a surgical procedure performed at an out-of-network facility. The patient receiving the surgery was covered by an ERISA-governed health plan provided by the employer and administered by an insurance company. Prior to the surgery, the facility contacted the plan administrator to verify coverage and was told that the plan would reimburse at the usual, customary, and reasonable (“UCR”) rate, not the lower Medicare rate. Relying on this representation, the facility performed the surgery. However, the plan later paid only at the Medicare rate, far less than the full billed amount. The facility’s successor in interest, having obtained the rights to the claim, sought to recover the unpaid balance.The action was first brought in California state court, then removed to the United States District Court for the Central District of California. The plaintiff asserted both ERISA and state law claims. The district court dismissed the ERISA claim for lack of derivative standing, as the plaintiff was not properly assigned the right to sue under ERISA. The court also dismissed the state law claims for negligent misrepresentation and promissory estoppel, holding that these claims were preempted by ERISA because they related to an ERISA-covered plan.The United States Court of Appeals for the Ninth Circuit reviewed the case. It affirmed the district court’s dismissal of the promissory estoppel claim, holding that, under circuit precedent, such claims are preempted by ERISA. However, the Ninth Circuit reversed the dismissal of the negligent misrepresentation claim. The appellate court held that ERISA does not preempt a negligent misrepresentation claim by a provider’s successor in interest when the claim arises from representations made by the plan administrator during a pre-service verification call. The court concluded that such a claim does not sufficiently “relate to” an ERISA plan to trigger preemption, as it is not based on an ERISA-regulated relationship or enforceable under ERISA’s civil enforcement mechanism. The case was remanded for further proceedings on the negligent misrepresentation claim. View "HEALTHCARE ALLY MANAGEMENT OF CALIFORNIA, LLC V. WSP USA, INC." on Justia Law

Two investment entities entered into an agreement to sell a significant number of shares of a company to a purchaser. The seller was represented by a law firm as administrative agent and a broker as placement agent. Before the purchaser paid for the shares, it placed the transaction on hold. Despite this, the shares were mistakenly transferred to the purchaser. Multiple parties, including the administrative agent and broker, communicated about the error, and assurances were made that the transfer would be reversed. However, the reversal did not occur, and years later, the purchaser executed documents asserting ownership of the shares, which had notably increased in value. After demands for the return of the shares went unmet, the sellers filed suit. The shares were eventually returned, but their value had dropped.The United States District Court for the Northern District of California addressed claims brought by the sellers against the purchaser for conversion, among other causes of action. The purchaser, in turn, filed a third-party complaint seeking equitable indemnity and statutory contribution from the administrative agent and broker, alleging negligence in their handling of the transaction. The district court granted summary judgment in favor of the third-party defendants on the equitable indemnity claim, reasoning that conversion is an intentional tort for which equitable indemnity is unavailable. The sellers and purchaser settled their claims, but the purchaser appealed the indemnity ruling.The United States Court of Appeals for the Ninth Circuit reviewed the district court’s decision. It held that, under California law, conversion is a strict liability tort, not an intentional tort requiring wrongful intent. Accordingly, a party liable for conversion may seek partial equitable indemnity from negligent joint tortfeasors. The panel reversed the district court’s summary judgment for the third-party defendants and remanded for further proceedings. View "SERENITY INVESTMENTS, LLC, ET AL. V. SUN HUNG KAI STRATEGIC CAPITAL, LTD." on Justia Law

Several researchers at the University of California received multi-year federal grants from agencies including the Environmental Protection Agency, the National Science Foundation, and the National Endowment for the Humanities. In April 2025, these agencies terminated the research grants by issuing form letters, citing shifts in agency priorities and referencing multiple Executive Orders issued by the President, some of which explicitly aimed to eliminate diversity, equity, and inclusion (DEI) and related initiatives from the federal government. The affected researchers alleged these terminations resulted in lost funding, harm to their reputations, and disruption to their projects, with no ready alternative sources of support.The researchers filed a class action lawsuit in the United States District Court for the Northern District of California, asserting constitutional and statutory claims, including violations of the First Amendment and the Administrative Procedure Act (APA). The district court provisionally certified two classes: one consisting of researchers whose grants were terminated by form letter without grant-specific explanation (the Form Termination Class), and another whose grants were terminated specifically due to the DEI Executive Orders (the DEI Termination Class). The district court granted a preliminary injunction, ordering the reinstatement of the grants for both classes. The government appealed.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court held that the plaintiffs had established Article III standing. It reversed the preliminary injunction for the Form Termination Class, concluding that the district court likely lacked jurisdiction over their APA claim because the claim was essentially contractual and thus barred by the Tucker Act. However, the Ninth Circuit affirmed the preliminary injunction for the DEI Termination Class, finding that the class was likely to succeed on its First Amendment claim because the grant terminations were based on viewpoint discrimination. The court remanded for further proceedings. View "THAKUR V. TRUMP" on Justia Law

Jeffrey Olson leased a Jeep Grand Cherokee from a car dealership under a lease agreement that included an arbitration provision and a delegation clause, which assigned questions about the scope of arbitration to an arbitrator. FCA US, LLC, the manufacturer of the Jeep, was not a signatory to the lease agreement. Olson later became the named plaintiff in a federal class-action lawsuit against FCA, alleging defects in the vehicle’s headrest system. FCA, not being a party to the lease, sought to compel Olson to arbitrate the dispute based on the arbitration agreement between Olson and the dealership.The United States District Court for the Eastern District of California denied FCA’s motion to compel arbitration. The district court found that FCA, as a non-signatory to the lease agreement, could not enforce the arbitration provision or its delegation clause against Olson. The court concluded that the arbitration agreement applied only to Olson and the dealership (including its employees, agents, successors, or assigns), and FCA did not qualify under any of those categories. Additionally, the court rejected FCA’s argument that it could use equitable estoppel to compel arbitration, holding that none of Olson’s claims were sufficiently intertwined with the lease agreement to justify such an exception under California law.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s decision. The Ninth Circuit held that FCA could not compel Olson to arbitrate because FCA was not a party to the arbitration agreement and no applicable exception—such as equitable estoppel—applied. The court clarified that, under both federal and California law, only parties to an arbitration agreement (or those qualifying under specific, limited exceptions) may enforce it. The court also rejected FCA’s reliance on Supreme Court precedent, finding it inapplicable to non-signatories in these circumstances. View "OLSON V. FCA US, LLC" on Justia Law

A consumer purchased a licorice product manufactured by a Minnesota company, relying on packaging that stated the product was “Naturally Flavored,” “Natural Strawberry & Raspberry Flavored Licorice,” and “Free of . . . Artificial Colors & Flavors.” The consumer later learned, through laboratory testing, that the product contained DL malic acid, which is an artificial flavor created from petrochemical sources. The consumer alleged that this ingredient rendered the product’s labeling false or misleading, and filed a putative class action in California, asserting claims for violation of the California Consumers Legal Remedies Act, unjust enrichment, and breach of express warranty.The United States District Court for the Southern District of California dismissed the complaint with prejudice. The court found that the complaint failed to plead with sufficient particularity that the malic acid was artificial, thus not meeting the heightened pleading standard of Federal Rule of Civil Procedure 9(b). The district court also held that the plaintiff did not plausibly allege that a reasonable consumer would be misled by the product’s labeling, reasoning that the labels did not explicitly state the product was “all natural” or “100% natural,” and that the ingredients list disclosed both natural and artificial ingredients.On appeal, the United States Court of Appeals for the Ninth Circuit reversed the district court’s dismissal. The appellate court held that the complaint satisfied Rule 9(b) because it identified the specifics of the alleged fraud and provided details about the laboratory testing. The court also held that the plaintiff plausibly alleged that a reasonable consumer could be misled by the product’s claim to be free of artificial flavors when it allegedly contained an artificial flavor. The case was remanded for further proceedings. View "TRAMMELL V. KLN ENTERPRISES, INC." on Justia Law