Justia Contracts Opinion Summaries

An inmate at Green Bay Correctional Institution, who is a practicing Muslim, filed a lawsuit under the Religious Land Use and Institutionalized Persons Act (RLUIPA) against the Wisconsin Department of Corrections (WDOC). He challenged WDOC's policy prohibiting inmates from leading religious programs when no outside religious leader or volunteer is available, claiming it resulted in unnecessary cancellations of religious programs. He also alleged that the cancellation of these programs breached a prior settlement agreement with WDOC.The United States District Court for the Western District of Wisconsin granted summary judgment in favor of WDOC on the RLUIPA claim, finding that the policy was the least restrictive means of furthering the compelling interest of maintaining prison safety and security. The court also granted summary judgment in favor of the inmate on the state law breach-of-contract claim as to liability but relinquished supplemental jurisdiction over the request for injunctive relief.The United States Court of Appeals for the Seventh Circuit reviewed the case. The court affirmed the district court's summary judgment in favor of WDOC on the RLUIPA claim, agreeing that the policy was the least restrictive means to ensure prison safety and security. However, the appellate court vacated the district court's partial judgment on the state law breach-of-contract claim. The court held that the district court abused its discretion by relinquishing jurisdiction over the remedy portion of the claim while retaining jurisdiction over liability. The case was remanded to the district court to determine whether to retain or relinquish jurisdiction over the entire state law claim. View "West v Hoy" on Justia Law

Technical Security Integration, Inc. ("Technical Security") and EPI Technologies, Inc. ("EPI") entered into a Sales Representative Agreement in which EPI agreed to sell Technical Security's products in exchange for commissions. The agreement included a clause requiring disputes to be submitted to mediation, and if mediation failed within 180 days, the prevailing party in any subsequent litigation would be entitled to attorneys' fees. A dispute arose, and EPI demanded mediation, but Technical Security did not respond promptly. EPI then sued Technical Security in state court, where it mostly lost. Technical Security sought attorneys' fees in federal court, which the district court denied, ordering each party to pay its own fees.The Circuit Court of Cook County, Illinois, granted partial summary judgment for Technical Security on the commissions dispute. EPI's remaining claims were dismissed, and the state court denied Technical Security's motion for attorneys' fees, citing a factual dispute. Technical Security then demanded mediation to resolve the fee dispute, but EPI did not respond. Technical Security subsequently sued EPI in the Northern District of Illinois, seeking fees and costs from the state court litigation. The district court granted summary judgment for EPI, concluding that Technical Security had delayed the mediation process.The United States Court of Appeals for the Seventh Circuit reviewed the case. The court found that the agreement did not specify a timeline for mediation demands or responses, creating ambiguity. The court held that the district court erred in faulting Technical Security for preventing mediation without considering whether EPI's actions were reasonable. The Seventh Circuit vacated the district court's summary judgment for EPI and remanded the case for further proceedings to determine the reasonableness of each party's conduct regarding the mediation timeline. View "Technical Security Integration, Inc. v EPI Technologies, Inc." on Justia Law

Bellin Memorial Hospital hired Kinsey & Kinsey, Inc. to upgrade its computer software. Kinsey failed to implement the agreed-upon software, leading Bellin to sue Kinsey in Wisconsin state court for breach of contract and other claims. Bellin also sued Kinsey’s president and a senior product consultant. Kinsey’s insurer, Philadelphia Indemnity Insurance Company, provided a defense under a professional liability insurance policy. During the trial, Bellin and Philadelphia Indemnity entered into a partial settlement, resolving some claims and specifying the conditions under which Bellin could collect damages from Kinsey. Bellin prevailed at trial and was awarded damages.The Wisconsin circuit court ruled that the limited liability provision in the Agreement did not apply due to Kinsey’s material breach. The court granted a directed verdict on the breach of contract claim against Kinsey, leaving the question of damages to the jury. The jury awarded Bellin $1.39 million, later reduced to $750,000 plus costs. The jury found Kinsey and its president not liable for intentional misrepresentation and misleading representation.Philadelphia Indemnity filed a declaratory judgment action in the United States District Court for the Northern District of Illinois, seeking a declaration that the state court’s judgment was covered by the insurance policy and that the $1 million settlement offset the $750,000 judgment. The district court ruled for Bellin, concluding that the state court judgment was not covered by the insurance policy.The United States Court of Appeals for the Seventh Circuit affirmed the district court’s decision. The court held that the insurance policy covered only negligent acts, errors, or omissions, and the state court’s judgment was based on a breach of contract, not negligence. Therefore, the $1 million set-off provision did not apply, and Bellin could recover the full amount of the judgment. View "Philadelphia Indemnity Insurance Co. v Kinsey & Kinsey, Inc." on Justia Law

Medical service providers referred plaintiffs’ debts to defendants, who sent letters, demanding payment of the principal plus 5% interest. Plaintiffs claimed that this violated 15 U.S.C. 1692g(a)(1), the Fair Debt Collection Practices Act, which states that debt collectors must specify the amount of the debt, and that Wisconsin law provides for interest (absent a contractual provision) only if a debt has been reduced to judgment, and any pre-judgment request for interest is forbidden. The Seventh Circuit affirmed summary judgment for the defendants. Wis. Stat. 426.104(4)(b), the “safe harbor” for people who act in ways approved by the Administrator of Wisconsin’s Department of Financial Institutions applies because the defendants sent the Administrator a letter asking whether they were entitled to add 5% interest to debts for the provision of medical services. The Administrator’s silence for 60 days resulted in deemed approval. The defendants were entitled to demand payment of both principal and interest, so the letters did not violate 15 U.S.C. 1692e(2)(A), which prohibits false representations about the character, amount, or legal status of a debt. The federal Act otherwise allows debt collectors to add interest when permitted by law. Plaintiffs’ debts arose under state contract law and are subject to the safe harbor provision. View "Aker v. Collection Associates, LTD." on Justia Law

Turnoy sold insurance to Shiner’s in‐laws for decades. After Shiner, a Chicago lawyer, demanded that Turnoy split commissions on their new policies, Turnoy sent him a check for $149,000. Rejecting $149,000 as too little, Shiner sued for breach of contract, then brought another suit, alleging tax fraud, 26 U.S.C. 7434, by reporting to the IRS the $149,000 as income to Shiner; Shiner had not cashed the check. The judge ordered Turnoy to pay Shiner damages of $16,000 for fraud. The Seventh Circuit reversed, noting that the state court rejected Shiner’s breach of contract claim before the district court’s decision. Turnoy had placed a restrictive endorsement on the back of the check, stating that by cashing the check Shiner accepted $149,000 as full payment. U.S. Treasury regulations provide that a check received but not cashed counts as income for tax purposes only if “credited or set apart to a person without any substantial limitation or restriction as to the time or manner of payment or condition upon which payment is to be made,” but Shiner neither asked for a new check nor otherwise communicated rejection of the check. Shiner’s inaction gave Turnoy a solid basis for believing that Shiner had accepted the check, so Turnoy’s filing of Form 1099 was not “willfully … fraudulent.” View "Shiner v. Turnoy" on Justia Law

APS is a broker for the purchase and sale of accounting practices, working through brokers who are treated as independent contractors and are assigned exclusive sales territories. Burford became an APS broker in 2003, under a contract with a “minimum yearly sales volume” requirement. Burford did not meet this requirement for four consecutive years. In 2010, APS’s owner, Holmes spoke with Burford about his poor performance. Burford failed to meet his minimum yearly sales volume requirements again in 2010 and 2011. In 2012, APS terminated Burford’s contract and reassigned his sales territory. Burford filed suit. The district court granted summary judgment in favor of the defendants, reasoning that Burford’s contract was terminable at will. On remand, a jury found for APS. The Seventh Circuit affirmed, rejecting arguments that the trial court erred by supposedly allowing APS to change the legal theory for its defense in violation of the “mend‐the‐hold” doctrine in Illinois law and abused its discretion by denying admission of an exhibit. The court also rejected an argument that the verdict was contrary to the weight of the evidence on whether APS waived its right to enforce the minimum sales requirement. View "Estate of Burford v. Accounting Practice Sales, Inc" on Justia Law

The law firm’s contract with XO Communications provided that the contract would be automatically renewed “for a similar term and at the same rates.” A customer who did not want to renew was required to notify XO at least 30 days before the expiration date in the contract. The contract provided that if the customer terminated the contract after the deadline it would have to pay a termination fee. XO’s monthly invoices contain a prominent reminder of the automatic renewal. After its third renewal, the firm wanted out of the contract because it was moving to a location not serviced by XO. The firm, not wanting to pay the $9,000 termination fee, filed a purported class action, alleging that XO’s monthly reminders should have included the date of the automatic renewal, or that XO should have otherwise notified the plaintiff of the renewal date. The Seventh Circuit affirmed dismissal, noting that: "It’s not as if the plaintiff were some hapless consumer bamboozled by a huge company…. Had this substantial enterprise kept track of the date of its contract with XO (more precisely the date of its latest renewal of the contract), it would not have incurred the modest termination fee." View "Cafferty, Clobes, Meriwether & Sprengel, LLP v. XO Communications Services, LLC" on Justia Law

The property owners, participants in the “Section 8” federal rental assistance program (42 U.S.C. 1437f(a)), sued the Wisconsin Housing and Economic Development Authority for allegedly breaching the contracts that governed payments to the owners under the program, by failing to approve automatic rent increases for certain years, by requiring the owners to submit comparability studies in order to receive increases, and by arbitrarily reducing the increases for non-turnover units by one percent. Because Wisconsin Housing receives all of its Section 8 funding from the U.S. Department of Housing and Urban Development (HUD), the Authority filed a third-party breach of contract claim against HUD. The district court granted summary judgment in favor of Wisconsin Housing and dismissed the claims against HUD as moot. The Seventh Circuit affirmed, noting that the owners’ Section 8 contracts were renewed after the challenged requirements became part of the program. “The doctrine of disproportionate forfeiture simply does not apply,” and Wisconsin Housing did not breach any contracts by requiring rent comparability studies in certain circumstances or by applying a one percent reduction for non-turnover units. View "Evergreen Square of Cudahy v. Wisconsin Housing & Economic Development Authority" on Justia Law

In the first case in “a long‐running and acrimonious business dispute,” Lardas claimed fraudulent inducement and breach of contract, arising from a settlement agreement, which Lardas argued was intended to deprive her nephew (Christofalos) of his ownership interest in Wauconda Shopping Center (WSC). The Seventh Circuit affirmed dismissal of Lardas’s case without prejudice, finding that Lardas lacked standing. Lardas had transferred her ownership in a predecessor entity to Christofalos. The second case involves Christofalos’s bankruptcy, in which the court authorized the sale of his interest in WSC (11 U.S.C. 363(b)). The Seventh Circuit dismissed an appeal as moot because the sale has been consummated and third parties have acted in reliance. Christofalos also challenged the denial of a discharge, based on a bankruptcy court finding under 11 U.S.C. 727(a)(4)(A), which authorizes denial of discharge where the debtor has “knowingly and fraudulently … made a false oath or account.” The Seventh Circuit affirmed, noting that Christofalos made a “host of false statements and omissions.” The court also affirmed denial of Christofalos’s “Motion to Reopen Case and Assign a Receiver” in Lardas’s case. View "Christofalos v. Grcic" on Justia Law

Frye was seriously injured in an accident while driving for his job. Frye accepted $100,000, the per-person limit, from the other driver’s insurer, assigning it to his lawyer and to his employer’s insurer, Auto-Owners, from which Frye had received $692,895.79 in workers’-compensation benefits. Frye’s injuries were also covered by commercial automobile and commercial umbrella policies, issued by Auto-Owners to Frye’s employer. The automobile policy required Auto-Owners to pay any compensatory damages Frye was legally entitled to recover for bodily injuries caused by an underinsured motorist. The umbrella policy afforded follow-on coverage. Auto-Owners agreed to pay Frye $1,282,314.21: $900,000 under the automobile policy ($1 million in total coverage, less $100,000 from the other insurer); and $382,314.21 under the umbrella policy ($1 million in UIM coverage, less $617,685.79 in net workers’-compensation payments). Frye argued that Indiana law required Auto-Owners to provide through its umbrella policy UIM coverage in an amount equal to the policy’s general liability limit ($5 million) and that the setoff for workers’-compensation payments was impermissible under the contract and Indiana public policy. The district court awarded AutoOwners summary judgment. The Seventh Circuit reversed. While Indiana law allowed Auto-Owners to abstain from providing UIM coverage in the umbrella policy, once it provided such coverage it was required under Section 27-7-5-2(a) to provide that coverage in limits equal to the policy’s general liability limit: $5 million. It cannot decrease that cap based on workers’ compensation payments. View "Frye v. Auto-Owners Insurance Co." on Justia Law